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It was almost a year ago when we last addressed Philadelphia’s controversial soda tax, after the Pennsylvania Supreme Court upheld the tax against legal challenges. In a surprising twist, it now appears that the health benefits and educational programs originally cited to justify the soda tax levy may not have been the driving force behind its enactment after all.  In a sprawling 160 page indictment, the U.S. Department of Justice suggested that Philadelphia City Council actually passed the soda tax due to a feud among labor unions and political corruption.  

Councilman and Union Leader Indicted

In a statement released last week, the Department of Justice reported that Local 98 Leader John “Johnny Doc” Dougherty and Philadelphia City Councilman Robert Henon, among other individuals associated with Local 98 electricians’ union, had been charged in a 116-count public corruption indictment.  The charges include multiple counts of bribery, embezzlement and wire fraud. The indictment asserts that Dougherty and Henon introduced the soda tax as payback against the Teamsters Union for a 2015 political ad criticizing Dougherty. As The Washington Times reported, the indictment states that when aides to Mayor Jim Kenney attempted to explain the various health benefits of the soda tax, Dougherty replied, “You don’t have to explain to me” and used expletives to express disinterest in the health benefits of discouraging the consumption of sugary beverages.  He hoped the soda tax would “cost the Teamsters 100 jobs in Philly.”

Soda Tax Controversy

When Kenney introduced the 1.5 percent soda tax in 2016, he asserted the new tax would help fund quality pre-K expansion, community schools, investment in community infrastructure, and energy efficiency. The mayor further estimated that the new tax would raise over $95 million to fund these initiatives.  However, the estimates proved excessive, as Philadelphia’s soda tax revenues came in 15 percent below original expectations in 2017. The revenue forced the city and Kenney to alter several of the proposed programs.

The soda tax received widespread criticism, particularly claims that the tax would disproportionately affect low-income, minority communities. Lauren Kane, spokeswoman for the American Beverage Association, asserted the tax was regressive and stated “these taxes are discriminatory and highly unpopular.”

Others claimed the tax would hurt local employment and would fail to be effective. In February 2017, after only a month of implementation, the Tax Foundation reported soda sales had begun to decline by nearly 50 percent and the change in consumer behavior would threaten the sustainability of the tax and would further call the reliability of revenues into question.  Some speculated consumers were purchasing sugary beverages outside of Philadelphia for consumption inside the city to avoid the tax. 

Allegations of Corruption

One particular group opposing the tax was the local Philadelphia Teamsters union. The Teamsters believed the tax would cause many of its members to lose their jobs by reducing the demand for soft drinks and corresponding demand for distributors.  And according to the recent indictment, Dougherty of the Local 98 believed the same.

When asked by the Washington Times whether the soda tax resulted from a vendetta between labor unions, Kenney replied “it may have been a revenge plot by Local 98, but it wasn’t to do with me.” Revenge against the Teamsters is not the only allegation Dougherty and Henon are facing. The indictment claims the corrupt relationship between Dougherty and Henon influenced more than just the price of soda but also potentially affected a cable TV service, the Philadelphia Parking Authority, and the Children’s Hospital of Philadelphia. Allegations of political corruption have also circulated, largely due to Dougherty’s close relationships with city, state, and federal officials. According to the Washington Times, Dougherty’s union has contributed heavily to multiple political campaigns for city council, district attorney, mayor, state legislators, and elected state judges. In an interview with the Washington Times, Nathan Benefield, the vice president at the free-market Commonwealth Foundation, stated “you can make all the good policy arguments, but there’s so much corruption and bribery that goes into creating bad policy, that’s what’s wrong with the politics of Philadelphia…it’s often driven not by ideology or by economics, but by backroom politics.”