Commentary: Court should strike down soda tax

Mike Inenar of the Finnegans Brigade pokes fun at Mayor Kenney’s soda tax in this year’s Mummers Parade.

Have you ever had someone secretly shake your Coke can before you popped the lid? The shocking spray of foam and fizz leaves you dripping, sticky, and ticked off.

Two months into Philadelphia's much-debated "soda tax," Philadelphians feel much the same.

Mayor Kenney, soda-can shaker extraordinaire, promised that distributors - not consumers - would bear the brunt of the tax. Instead, corner store prices have skyrocketed on thousands of popular beverages, from soft drinks and teas to energy drinks and low-/no-calorie options.

In other words, the warnings of those who opposed the tax are proving entirely true.

It's hardly surprising. In some cases, the 1.5-cents-per-ounce tax is higher than the price of the drinks themselves. Businesses already operating on extremely thin margins simple can't absorb the added cost.

What's more, this tax reinforces the notion that Philly isn't business friendly. This is particularly ironic given Kenney's recent attempt to tout slightly lower business and wage tax rates in the city this year.

In April, the Commonwealth Court will consider a legal challenge to the tax. The decision should be simple: The court must strike down the soda tax.

Simply put, City Council exceeded its authority in approving the tax. And while that should be reason enough to rule in favor of city citizens, this tax also represents a terrible attempt to deal with long-term fiscal challenges, brought on by years of government mismanagement.

For example, right now Philadelphia is sitting on tens of millions of uncollected tax dollars - left on the table because the city doesn't perform annual real estate property reassessments. For inexplicable reasons, city leaders waited years to select a vendor to build a new computer system to streamline the real estate assessment process. As a result, the ongoing development boom, which could have delivered millions in additional tax dollars, hasn't. And it won't until at least 2019.

But instead of pursuing long-term solutions, the city is relying on budget gimmicks to artificially boost expected revenues from the beverage tax. National trends have shown a decline in sugary drink consumption. Revenue from Philly's sugary beverage tax will undoubtedly also fall.

Yet, the Kenney administration claims it can offset declining consumption through increased enforcement. Given Philadelphia's historical inability to collect the millions owed in business and real estate taxes, this claim is hardly believable.

On the campaign trail, candidate Kenney promised program-based budgeting to force city departments to justify their spending, increase efficiency, and save taxpayer dollars. But when push came to shove, finding something new to tax was easier than implementing the accountability that would have benefited all Philadelphians.

It's little secret that less than half the money projected to come from the soda tax will actually go to pre-K in the first five years. This, of course, after Kenney pleaded for the tax supposedly on behalf of children.

Instead, tens of millions of dollars will fund pet projects and fill the city's coffers.

In reality, a close look at the city's new contract with its largest municipal union, AFSCME District Council 33, shows this tax was never really about the kids but about rewarding Kenney's labor allies with overly generous contracts.

AFSCME, which supported the soda tax, endorsed Kenney for mayor. In the latest contract with the union - signed in July, after the soda tax passed - Kenney agreed to give union members a whopping 11.5 percent raise over the next four years, far above what any cost-of-living increase would justify.

Meanwhile, the mayor failed to achieve any meaningful concessions from the union on the city's two main cost drivers: health benefits and pensions. The union agreed only to minimal pension reforms that will not save taxpayers much money, if at all.

This giveaway to the union is projected to take a $170 million bite out of city finances over the next five years and will set the stage for future union contract negotiations. In other words, taxpayer costs will only rise from here.

Philadelphia taxpayers deserve real solutions to the city's pressing fiscal problems - not an illegal, regressive, and harmful tax packaged as a solution.

The court should strike down the soda tax, and Philadelphia city leaders should finally take on the serious reforms taxpayers deserve.

Matthew J. Brouillette is the president and CEO of the Commonwealth Partners Chamber of Entrepreneurs. matt@thecommonwealthpartners.com