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The Soda Saga Continues

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For those of you who have been following our coverage of the “soda tax” scenario taking place across the country, a movement that started when Philadelphia became the first U.S. city to pass a tax on soda and other “sugary” beverages. Other cities, including Chicago, Illinois, joined in and then retreated when the Board of Commissioners voted overwhelmingly to repeal it. Seattle, San Francisco, Oakland, and Boulder continue to fight for the tax although the outcomes are unclear, but Philadelphia also persists. Now the uproar has forced the case back to court.  Laura McCrystal, staff writer for Philly News, wrote that the Pennsylvania Supreme Court announced it would consider the legality of the city’s 1.5 cents per ounce tax on soda and other sweetened beverages.

This is not the first time that the tax battle has been fought in court. A Common Pleas Court Judge dismissed the lawsuit when The American Beverage Association and other local businesses’ in the Philadelphia area had tried last year to end the tax. Later, in June, a Commonwealth Court voted 5-2 to uphold the tax which they believe was aimed more at distributors than at consumers.

On the positive side, the tax was meant to reduce consumption and therefor obesity, and the tax revenue was projected to fund a pre-K program and assist in the rebuilding of parks, recreation centers and libraries, but these projects have been slow to ramp up, which has only served to further the controversy.   Even as one year has passed and the tax still stands as law, the opponents are strong in their condemnation and argue for its repeal. Much of the continued concern is driven by the fact that consumption of soda has decreased more than originally anticipated, which has resulted in a   subsequent decrease in tax revenue (an estimated $78.8 million over the first 12 months, compared to original projections of $92 million). The statistics and the financial picture painted portray different messages depending on the source. The beverage industry points to a financial failure while the economists emphasize that the income is within the normal range.

Loss of revenue also can trickle down to job losses, and an impact of poorer families with tighter grocery budgets, causing further challenges for retailers. 

We will continue to keep you up to date on any further information coming as we wait for the Supreme Court’s decision.

Chris Martin, CPA, Sobel & Co.