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Philadelphians sour on sugar tax

“I’m so happy that Michael Bloomberg is not running for president,” Frank Olivieri, owner of Pat’s King of Steaks restaurant, said Monday after Philadelphia's mayor signed a tax on sweetened soft drinks. “Then everybody would be soon paying for a soda tax.”

Olivieri is one many Philadelphians upset about the tax, which was signed into law Monday by Philadelphia Mayor Jim Kenney. The 1.5-cent-per-ounce tax on distributors of sweetened beverages received heavy support from former New  York mayor Bloomberg, but opponents call it illegal and discriminatory. 

“I think it’s ridiculous that the city of Philadelphia is taxing sugary drinks,” said Olivieri, whose family-run cheesesteak place was founded in 1930 and is an institution in the City of Brotherly Love. “It’s a sleazy way for city government to acquire more money because they can’t get enough money.” 

The Sweetened Beverage Tax was approved by City Council by a 13-4 vote last week. The measure, which will take effect in January 2017, imposes a tax on sugar-added and diet sodas, as well as juices whose makeup is under 50 percent fruit or vegetable juice. Kenney projected that revenues from the soda tax would be almost $410 million in the next five years. 

Supporters said the tax would curb consumption of sugary beverages and at the same time fund pre-kindergarten classes and community schools. 

“A key thing is that the mayor talked from the beginning on how he would use the revenues,” said David Goldberg, a spokesman for Healthy Food America. “Framed as a way to pay for pre-kindergarten, the tax survived because it had the health benefits.”

The enactment of the soda tax could be the turning point in a long campaign to impose the tax on cities all over the United States, Goldberg told AMI Newswire. So far Berkeley, California -- which enacted a one-cent-per-ounce tax in 2014 that took effect in March of last year -- is the only city that has approved such a measure. But residents in three other Bay Area cities – San Francisco, Oakland and Albany – are poised to vote on soda tax ballot measures in November. So are voters in Boulder, Colo.

Sugary-drink taxes are gaining in popularity as the negative health effects of soda consumption -- which can include obesity and diabetes -- become better understood, Goldberg said. He pointed to research by the T.H. Chan School of Public Health at Harvard University that concluded a 3-cent-per-ounce tax on sugar-sweetened beverages would reduce health costs by millions of dollars over a 10-year period. 

Supporters of the tax in Philadelphia also highlighted the intention to earmark revenues for preschool as well as upgrades to recreation centers, parks and libraries.

But Olivieri called the pre-kindergarten funding a smokescreen. Eventually, the city will charge a higher soda tax and allocate the money for something else, he said. 

“It’s bad for restaurants and bad for the public,” he added. “It’s very big brotherish.” 

Researchers have also questioned whether soda taxes discourage sugar consumption, rather than just increasing the cost of running a legal business. The Berkeley tax raised retail soda prices by less than half of the expected amount, according to a study from Cornell University and the University of Iowa. That means fewer people were discouraged from purchasing sugary soft drinks because retailers absorbed a large portion of the tax rather than passing it on to consumers. In the case of Coke and Pepsi, less than a quarter of the tax was passed on to shoppers, the researchers found. 

“The reason for this surprising result could be related to the fact that it’s a city tax, and therefore store owners have to be concerned about the ability of consumers to shop at stores outside of Berkeley,” one of the researchers, John Crawley, said in a prepared statement. “Concerns about cross-border shopping could contribute to a low pass-through of the tax.” 

The American Beverage Association has vowed to file a lawsuit against the tax, though no such suit has been filed as of Monday.

Soda taxes are discriminatory and unpopular, and similar measures have been defeated 43 times during the last eight years, said Shanin Specter, an attorney for the association.

“This tax is illegal because it violates the Pennsylvania constitutional requirement of uniformity of taxation, Specter told AMI Newswire, "and because a local government doesn’t have the power to impose a sales tax when the Pennsylvania legislature already has imposed a sales tax.” 

Local governments in the state have attempted to impose similar taxes many times over the last 100 years – on such items as coal, liquor and billboards – only to be struck down in the court system, Specter said. 

Mayor Kenney said in a prepared statement Monday about the soda tax campaign, “Opponents of my proposals had the resources to hire professional lobbyists to battle the effort, as they have done in numerous other cities. But we had something far stronger – the dreams, hard work and compassion of hundreds of supporters who share my goal for a better Philadelphia.” 

The pro-tax side, however, had financial support from billionaire and former New York Mayor Michael Bloomberg, who put $1.6 million into the campaign and is aiming to bankroll the upcoming votes in the western states. 

Olivieri suggested that instead of taxing a select group of customers – those who enjoy sweet drinks – the city should simply do what businesses do: cut spending. 

“You cannot fight city hall,” he said. “We have the inmates running the asylum.”