A panel of judges in Pittsburgh has ruled that Philadelphia’s 1.5-cent per fluid ounce tax on sugar-sweetened beverages is valid and not duplicative of the general retail sales tax. And, since the tax is paid by distributors and not consumers, it does not violate federal law prohibiting taxes on retail transactions conducted with food stamps, the court ruled.
Just the day before the ruling was issued, the AMA House of Delegates adopted policy to “encourage state and local medical societies to support the adoption of state and local excise taxes on sugar-sweetened beverages with the investment of the resulting revenue in public health programs to combat obesity.”
The AMA Litigation Center filed an amicus brief in the case in support of the Philadelphia ordinance. The Litigation Center was joined by several other organizations, including the American Heart Association, the American Cancer Society Cancer Action Network, the Pennsylvania Medical Society and the Philadelphia County Medical Society.
The tax was enacted in June 2016. Last September, a coalition of retailers and retail groups filed an injunction to block it. And on Dec. 19, 2016, a local court denied the injunction and cited long-standing precedent addressing the duplicative tax issue.
The case was then heard by a seven-judge panel in commonwealth court, a branch of the Pennsylvania appellate court system which mostly hears cases involving state and local governments and regulatory agencies.
That was where the AMA and the other organizations joined the case. And the long-ago established precedents were cited in their amicus brief.
“These taxes are a well-established tool of local and federal governments alike; they are just new to soda,” the brief stated, citing the efforts of Alexander Hamilton, the nation’s first treasury secretary. Hamilton used fiscal and health justifications for imposing a tax on whiskey in 1791.
In the 5–2 majority opinion upholding the tax, Judge Michael Wojcik cited other precedents involving overlapping state and local laws concerning the regulation of alcohol, anthracite coal strip mining and the hunting of game.
“It shows that these taxes are likely to be upheld and it is within the powers of local governments to impose these types of taxes,” said attorney Rachel Bloomekatz, co-author of the amicus brief and a principal at the Gupta Wessler law firm in Washington. “There is certainly historical precedent for using taxes to promote public good and public health.”
The amicus brief notes that a 12-ounce can of soda has more than eight teaspoons of sugar in it, and that sugar consumed in beverages covered by the tax “have led to dramatic health problems.”
“Despite the sugar industry’s effort to undermine and confuse the science, the evidence is now unequivocal: Sugar-sweetened beverages (SSBs) can increase risks for heart disease, type 2 diabetes, obesity, tooth decay and other health problems plaguing Philadelphia and the country at large,” the brief stated.
The brief also states that 39 percent of all added sugar intake in the American diet comes from these drinks, according to the dietary guidelines published by U.S. Department of Health and Human Services and U.S. Department of Agriculture in 2015.
The concept of taxing SSBs to reduce consumption was discussed in an AMA Council on Science and Public Health report, that was approved by the House of Delegates in June.
“The most effective strategies for reducing consumption of SSBs appear to be restricting access in schools and potentially other settings, taxing beverages with added sugars, including warning labels on packaging, and using plain packaging,” the report states.
Tax revenues from SSBs in Philadelphia, however, were not earmarked for public health or anti-obesity efforts. A report in the Journal of Public Health Management and Practice describes how local health departments’ dissemination of research findings on the potential benefits of an SSB tax played an important-but-secondary role in getting the tax approved. The decision to use tax revenue to fund early education was the reason the tax was approved after two previous proposals were defeated, according to the report.
In addition to early childhood education, the Philadelphia SSB tax revenues would funds parks and recreation and a “healthy beverage” tax credit, Bloomekatz said. She added that, even when funds are earmarked for non-health-related projects, there can be health-related benefits. She added that the AMA “is a champion of early education as an important health measure.”
Similar tax controversies are bubbling in Seattle and Cook County, Ill., which includes Chicago, and Bloomekatz cautioned that state and local laws can vary widely, so legal challenges will be different. In Philadelphia, for example, the question was whether the city tax was pre-empted by state law, she explained.
In Cook County, the tax covers pre-packaged beverages and not drinks made on premises, so opponents argue that it violates the Illinois Constitution’s clause mandating tax uniformity. Implementation of the tax was to begin July 1, but a judge ordered an injunction on June 30, ruling that issuing refunds would be difficult if the tax were later ruled unconstitutional.