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House of Representatives
Session of 2019 - 2020 Regular Session


Posted: March 21, 2019 03:24 PM
From: Representative Seth M. Grove
To: All House members
Subject: Soda Tax Preemption
In 2016 Philadelphia levied a controversial tax on sugary drinks (soda tax) which required those purchasing “sugary beverages” to pay a 1.5 cent tax per ounce purchased. Although Mayor Kenney claimed the tax would fund Pre-K, the city controller later admitted 74% of the tax revenue went to the city’s general fund and not Pre-K.

Under current state law, no municipality can raise a local tax which has not been authorized by the Commonwealth. Unlike most municipal governments, which can only raise taxes directly authorized by the state, the City of Philadelphia was permitted to levy new taxes by the state under the Sterling Act. However, the Sterling Act requires any new tax levied by the city to be on an item not subjected to state taxation. The intent of this section was to prevent Philadelphia from taxing an item which would economically impact state revenue collections.

The Philadelphia Beverage Tax (PBT) violates the intent of the Sterling Act as the tax has been an unmitigated disaster with a significant and negative impacts to both the state’s economy and revenue. The negative impact of the tax was quickly seen with soda companies, grocery stores and other distributors reporting sales had dropped between 30-50% in the first two months. The loss of sales caused by the city’s beverage tax led Pepsi to announce layoffs ranging between 80-100 employees. Coca- Cola has reported similar layoffs with 40 employees losing their jobs. At the same time, the tax has resulted in some grocery stores closing in West Philadelphia resulting in further job losses for the city and the state. In total more than 1,200 jobs have been lost following the enactment of the PBT. The loss of jobs combined with the reduction in sales for the affected companies impacts state revenue and our budget.

Due to the negative impact of the PBT, I plan to introduce legislation to address this harmful tax. This legislation, modeled after House Bill 2241 last session, would reinforce the intent of Sterling Act and preempt local governments from instituting a beverage tax. Please join me and co-sponsor this legislation to preempt local governments from adopting a beverage tax. Should you have any questions please contact Jordan Grant by email at Jgrant@pahousegop.com .

Introduced as HB1464