How Mayor Kenney’s soda tax ignited controversy and impacted Philadelphia

Remember Philadelphia’s soda tax?

Known as the sweetened-beverage tax, the 1.5 cents-per-ounce levy took effect in 2017, making Philadelphia the first big U.S. city to tax soda and becoming a key component of Mayor Jim Kenney’s legacy.

The tax caused a political uproar that flooded City Hall with millions of dollars in lobbying, prompted a legal battle in the state Supreme Court, and helped spawn three unsuccessful campaigns in 2019 to deny Kenney a second term.

But today all the fizz has gone out of the controversy.

The tax was not a relevant issue in this year’s mayoral race — even candidates who had been outspoken against it didn’t talk about it on the campaign trail or propose its repeal.

The tax has raised about $480 million, which Kenney has used to support universal pre-K, community schools, and an ongoing effort to update the city’s parks, libraries, and recreation centers.

Spending to oppose it has plummeted in recent years. And with an incoming mayor and Council that has largely supported the levy and the programs it pays for, the tax isn’t going anywhere.

Although the tax made national news in its early days and pundits predicted more cities would follow suit, few have. But for Philadelphia, Kenney sees his victory as an important part of his tenure.

“I think it was one of the biggest and most difficult legislative accomplishments,” Kenney said of the beverage tax in a recent interview reflecting on his record.

Kenney’s predecessor, former Mayor Michael Nutter, had unsuccessfully proposed a soda tax, eager for the revenue and the potential positive impact on the health of city residents from an anticipated decrease in soda consumption.

Kenney proposed the levy just a few months after taking office. As a new and relatively popular mayor who had relationships with City Council, he was able to get it done by tying the funds to free pre-K and much-needed updates to the city’s parks, libraries, and recreation centers.

His administration launched a robust advocacy campaign that framed a vote against the tax as a vote against helping Philly’s kids. Still, opponents of the tax called it regressive, saying it would make groceries more expensive for the very families Kenney was trying to help, would hurt small businesses like bodegas, and would result in fewer union jobs for beverage distributors and grocery workers.

“Literally every Council session they were here with signs and little children,” Council President Darrell Clarke said in a recent interview. “So what are you gonna do? And even with that, though, it was a difficult vote. The tax, particularly the early version of it, the revenue was raised from those underserved communities.”

Drowning out the powerful soda lobby was not easy. For weeks Teamsters drove Coke and Pepsi trucks around City Hall, blaring their horns. An “Ax the Tax” campaign, funded by the beverage lobby, organized local bodega owners and grocers in opposition.

“After all that we went through negotiating, all the internal conflicts and back and forth and shuttle diplomacy between the second floor and the fourth floor, to wind up with a final vote of 13-4 was I think a great accomplishment,” Kenney said.

After negotiating over the tax rate and what to include in the tax, Council voted to tax not only soda, but any sugary or artificially sweetened drink, including diet sodas and juices. The tax is levied on beverage distribution — but is often passed onto consumers.

When the tax passed, the fight wasn’t over. The soda lobby continued spending as the case was appealed all the way to the state Supreme Court.

“We immediately were sued by some of the wealthiest people and companies in the United States attempting to keep ... little kids from going to pre-K,” Kenney said. “I don’t think I ever would totally forgive that.”

Today, those 18-wheeler horns blaring in Center City are a distant memory.

The American Beverage Association, which spent $19 million on lobbying in Philadelphia from when it was proposed in 2016 to when Kenney won a second term in 2019, hasn’t filed a report since September 2022. Corporations that lobby Philadelphia must file quarterly reports with the Board of Ethics if they spend more than $2,500 in a three-month span.

Anthony Campisi, a spokesperson for the American Beverage Association, said the group still thinks there are “better ways” to fund the programs supported by the beverage tax, noting the group’s longstanding claim that it “negatively impacts” small businesses and working families.

“Our companies include hundreds of employees in well-paid union jobs who are part of the fabric of Philadelphia, and we look forward to working with Mayor-elect [Cherelle] Parker on her agenda of building a more equitable and prosperous city,” Campisi said.

Jeff Brown, a grocery store owner who was outspoken over the tax, blamed it for the closure of one of his ShopRite stores in 2019 — which the Kenney administration pushed back against. But Brown didn’t argue for repealing the tax during his mayoral run this year.

Danny Grace, secretary-treasurer for Teamsters Local 830, had predicted the tax would kill some jobs at his union. He estimates that about 750 of his 3,800 members were laid off or found new jobs because there was less demand for soda.

Grace was astounded that the tax was not a topic in this year’s mayor’s race. He considers Parker, who supported the tax in 2016 while a member of City Council, to be “pro-union” and hopes to have conversations with her about readjusting the levy.

Still, he’s not optimistic about his prospects.

“I would love to see them either change the tax to smooth it out over other industries or reduce it so we can get some sales back in the city so my guys will have a chance at earning a decent living,” Grace said. “But I don’t see that happening.”

Philadelphia was the largest city to enact a sweetened-beverage tax and it was celebrated by health advocates. By late 2016, Boulder, Colo., San Francisco, and Oakland, Calif., had all enacted soda taxes, followed by Seattle in 2017.

But Santa Fe rejected a proposal in 2017 and Cook County, Ill., which includes Chicago, repealed its tax not long after it went into effect. Massachusetts was looking into a statewide soda tax that never progressed. Some states have also banned soda tax measures.

Since then, there have been few instances of other municipalities or states taxing soda.

“It reached a fever pitch in 2017 and 2018,” said John Buhl of the Urban-Brookings Tax Policy Center. “Philadelphia was one of the big jurisdictions that raised the profile. Since then, things have stalled.”

A new tax is often controversial when it goes into effect, Buhl said. “But after a while a person might get used to it.”

The powerful soda lobby, which largely abandoned Philadelphia, is still hard at work elsewhere to prevent additional taxes. But a more likely answer for the lack of more recent soda tax legislation could be that health advocates are less motivated because overall consumption of sugary beverages is down.

Grocery store aisles that used to be lined with Coke and Pepsi cases are now sharing space with dozens of flavored waters and seltzers.

”Consumption is way down,” said Marion Nestle, a New York University professor and author of a book on soda politics. “A lot of the work has already been done, and you don’t see anything about proposed taxes anymore.”

But it’s the kind of levy that could reemerge as municipalities look for revenue alternatives to rebound from losses after the pandemic.

“With the increase of work from home, localities have every right to be concerned about major revenue streams, like commercial property taxes,” Buhl said. “That could jump-start another conversation about it.”

Former Gov. Ed Rendell understands how anger over a tax can fade, as he sparked outrage as mayor of Philadelphia when he pushed for a liquor-by-the-drink tax.

“Whenever anybody talks about a tax increase, there’s a reflex reaction against it,” Rendell said. “Then when it goes into operation, people find it’s not so onerous after all. Sometimes they don’t even notice it.”

While the tax has raised millions of dollars and funded new programs, one point of contention has been how much of the money actually goes to the programs it’s intended for. A 2022 report from the controller’s office found just 50% of the revenue went to pre-K and Rebuild since 2017, while the other half went into the city’s general fund.

Kenney noted that for several years the city was tied up in litigation so it kept the revenue on hold, wary of spending money they might have to pay back. It also takes time for programs to get underway, he said, which has led to some funding delays.

“You still have a contractual process to go through so you can’t just throw buckets of money out the window, you have to bid things,” he said.

Parker, who said repeatedly on the campaign trail she will keep the tax, did not answer questions through a spokesperson on whether she’d earmark the revenue specifically for the programs.

Critics of the tax said it would be a declining revenue source as fewer people purchased sweetened beverages due to the higher cost. A look at revenue from the seven years the tax has been in effect shows revenue that has ebbed and flowed. The tax, which has brought in between $69 million and $77 million in the six full years it’s been in effect, brought in $2 million less in 2022 than in 2021 but $5 million more in 2021 than in 2020.

The city found that in the years since the tax has been in effect, cases of gestational diabetes have decreased. Studies have suggested similar positive health outcomes in San Francisco and Seattle. And while the dip in soda consumption in cities hasn’t directly related to a drop in obesity, according to Nestle, if people are drinking fewer heavily sugared drinks, that’s still good for public health.

For Kenney, it all amounts to vindication.

“In the end, all the things that they said were going to happen, the doom and gloom, that they were going to close bottling plants ... and they scared the crap out of everyone that worked for them. And they were wrong.”

Staff writer Anna Orso contributed to this article.