Layoffs, Litigation, Local Education — Where We’re At With the Soda Tax
March 8, 2017

Where We’re At With the Soda Tax

Written by Matt Schickling


Nearly three months after the soda tax was enacted in Philadelphia, Pepsi announced 80 to 100 layoffs through its three Philadelphia-area distribution plants last week.

This brought Philly’s controversial tax on sweetened beverages, once again, into the national spotlight.

“They are literally holding hostage the jobs of hardworking people in a battle to overturn the tax,” city spokeswoman Lauren Hitt said in a press statement at the time.

She cited the corporation’s $35 billion in gross income and $6 billion in profit last year and highlighted Pepsi’s “hundreds of thousands” spent on lobbyist and advertising to fight against the tax.

Meanwhile, according to Philly.com, Pepsi sales in Philadelphia took above a 40-percent dip since the tax went into effect in January, and Pepsi spokesman Dave DeCecco pointed this decline as the reason for layoffs.

These reports brought Mayor Jim Kenney back into the echo chamber, and he blasted Pepsi for using employees in what he saw as a political move.

“Talk about using your employees as pawns. I always thought they sunk to a low, but this is a new low for them,” the mayor told CBS.

The tax has been Kenney’s baby, meant to augment funding for pre-k programs, community schools and the Rebuild project, a seven-year plan to invest in and revitalize Philly’s neighborhood parks, recreation centers, playgrounds and libraries throughout the city.

The day after the layoffs were made public, Kenney announced two ordinances of his own to authorize borrowing $300 million to create a governance structure for Rebuild.

But according the release, these bonds will not be issued until the Beverage Tax litigation is resolved.

The fight against this tax has been ongoing since Kenney proposed it during his first budget address.

Back then, the American Beverage Association, an organization backed by soda companies and distributors, lobbied against it and ran constant advertisements claiming that the tax would hurt the poor and middle class. It was even dubbed the “grocery tax” by opponents throughout this campaign.

In June, City Council approved the tax at 1.5 cents per ounce. That would increase the price of a 12-pack of 12-ounce sodas by $2.16.

Despite the constant opposition, it was enacted this January.

Before that, it survived a lawsuit last December, when the soda industry turned to the courts for help. The Philadelphia Common Pleas Court dismissed the litigation, and there is currently an appeal with the Pennsylvania Commonwealth Court.

While Pepsi’s claims of falling sales may be accurate, the city’s Revenue Department has reported $5.7 million in collections for January. That more than doubles previous projections of $2.3 million in revenue from the soda tax.

Still, the tax would have to bring in more than $7.5 million per month to match the $91 million projection for its first full fiscal year.

As for Rebuild, while the bonds may be tied up in litigation, city officials will use existing capital funds to get the scheduled projects off the ground this summer.

As it stands now, the administration seems confident that the soda industry’s lawsuit will be struck down state court. But that won’t likely end the fight, especially as other cities throughout the U.S., like Chicago, get ready to enact their own sugary beverage taxes in coming months.

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