The Supreme Court of Pennsylvania Leaves Philadelphians Thirsty for Soda and Certainty in Williams V
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Volume 64 Issue 1 Article 5 4-1-2019 The Coca-Cola Capitation Conundrum: The Supreme Court of Pennsylvania Leaves Philadelphians Thirsty for Soda and Certainty in Williams v. City of Philadelphia John T. Morgan Jr. Follow this and additional works at: https://digitalcommons.law.villanova.edu/vlr Part of the State and Local Government Law Commons, and the Taxation-State and Local Commons Recommended Citation John T. Morgan Jr., The Coca-Cola Capitation Conundrum: The Supreme Court of Pennsylvania Leaves Philadelphians Thirsty for Soda and Certainty in Williams v. City of Philadelphia, 64 Vill. L. Rev. 221 (2019). Available at: https://digitalcommons.law.villanova.edu/vlr/vol64/iss1/5 This Note is brought to you for free and open access by Villanova University Charles Widger School of Law Digital Repository. It has been accepted for inclusion in Villanova Law Review by an authorized editor of Villanova University Charles Widger School of Law Digital Repository. Morgan: The Coca-Cola Capitation Conundrum: The Supreme Court of Pennsylv 2019] Note THE COCA-COLA CAPITATION CONUNDRUM: THE SUPREME COURT OF PENNSYLVANIA LEAVES PHILADELPHIANS THIRSTY FOR SODA AND CERTAINTY IN WILLIAMS v. CITY OF PHILADELPHIA JOHN T. MORGAN, JR.* “[T]he power to tax involves the power to destroy . .”1 I. BREAKING THE ICE: AN INTRODUCTION TO THE PREEMPTION OF LOCAL TAXES IN PENNSYLVANIA Over two centuries after prominent Philadelphia resident, Benjamin Franklin, equated the certainty of taxes to that of death, Philadelphians pay some of the highest taxes in America.2 Residents of Philadelphia, Pennsylvania pay almost four percent of their annual income to the city, in addition to state and federal income tax.3 Those choosing to forego the city life and commute to work fare only slightly better, as they are sub- jected to a three-and-a-half-percent city income tax.4 Philadelphia taxes result in the inflation of ticket prices for Eagles, Phillies, and Flyers games, * J.D. Candidate, 2019, Villanova University Charles Widger School of Law; B.S.Ed. 2016, Emporia State University. This Note is dedicated to my fiancee´ and law school sweetheart, Brittany Saxton, who I’m sure is quite thrilled to be acknowledged in an article about municipal taxing authority, and who so patiently tolerated many long hours apart so I could research, write, and edit. I also want to thank Lydia Ellsworth, Tanner McCarron, Peyton Carper, Timothy Muyano, Thallia Malespin, Ryan Ahrens, Meaghan Geatens, and Abigail Glascott for their meticulous and attentive feedback which made this Note possible. 1. See McCulloch v. Maryland, 17 U.S. 316, 431 (1819) (opinion of Chief Jus- tice John Marshall) (“[T]he power to tax involves the power to destroy . .”). 2. See Letter from Benjamin Franklin to Jean-Baptiste Leroy (Nov. 13, 1789), in THE WRITINGS OF BENJAMIN FRANKLIN, 1789–1790, 68–69 (Albert Henry Smith, ed., 1907) (“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”); Cities with the Highest Tax Rates, INTUIT TURBO TAX (2016), https://turbotax.intuit.com/tax-tips/fun-facts/cities-with-the-highest-tax-rates/L2 WEdS802 [https://perma.cc/4LFB-HC3D] (ranking Philadelphia, Pennsylvania second in the United States for highest municipal taxes). 3. See PHILA., PA., CODE ch. 19-1500, § 19-1502 (2018) (imposing tax of 2.3809% on income of Philadelphia residents as of July 1, 2018); PHILA., PA., CODE ch. 19-2800, § 19-2803(2018) (imposing additional tax of 1.5% on income of Phila- delphia residents). 4. See PHILA., PA., CODE ch. 19-1500, § 1502 (2018) (imposing tax of 3.4567% on nonresidents of Philadelphia as of July 1, 2018). (137) Published by Villanova University Charles Widger School of Law Digital Repository, 2019 1 Villanova Law Review, Vol. 64, Iss. 1 [2019], Art. 5 138 VILLANOVA LAW REVIEW [Vol. 64: p. 137 along with many similar “amusements.”5 In fact, Philadelphians cannot stay in a hotel, purchase a dog, park a car, or play a game of ski-ball with- out being subjected to a city tax.6 Philadelphia residents pay roughly forty- five different types of taxes despite legislation designed to limit the taxing authority of Pennsylvania cities, boroughs, and municipalities.7 Although cities like Philadelphia appear to possess immense taxing authority, it may come as a surprise that, independently, local govern- ments are effectively powerless in their ability to levy taxes.8 In fact, town- ships, cities, and municipalities rely exclusively on delegations from state legislatures to police their citizens, organize their communities, and—im- portantly—raise revenue through taxation.9 While the extent of a local government’s authority varies dramatically from state to state, one princi- ple remains ubiquitous: local ordinances must not be inconsistent with state law.10 Parties seeking to evade enforcement of municipal legislation 5. See PHILA., PA., CODE ch. 19-600, § 19-603 (1937) (imposing tax on admis- sion fees for concerts, movies, and sporting events). Other amusements subject to the tax include: Any theatrical or operatic performance, concerts, motion picture shows, vaudeville, circuses, carnivals, side shows, exhibitions, shows, displays, dancing, all forms of entertainment at fair grounds, amusement parks and athletic contests, including wrestling matches, boxing and sparring exhibitions, baseball, football and basketball games, golfing, tennis, hockey, archery and shooting, where a charge, donation, contribution or monetary charge of any character is made for admission. Id. § 19-601. 6. See PHILA., PA., CODE ch. 19-2400, § 19-2402 (1986) (imposing tax on price to stay in hotel rooms in Philadelphia); PHILA., PA., CODE ch. 10-100, § 10-103 (1986) (imposing licensing fee of forty dollars per unsterilized dog and sixteen dollars per sterilized dog); PHILA., PA., CODE ch. 19-1200 (1937) (imposing tax on parking or storing vehicles in city); PHILA., PA., CODE ch. 19-900, § 19-1903 (1945) (imposing tax of one hundred dollars per year per “mechanical amusement device”). 7. See Gene Marks, 44 Taxes We Pay as Residents of the Great City of Philadelphia, PHILA. MAG. (Mar. 6, 2015, 10:38 AM), https://www.phillymag.com/news/2015/ 03/06/43-taxes-pay-residents-great-city-philadelphia/ [https://perma.cc/T7FH-U P5L] (listing various taxes for which Philadelphia residents are liable to pay). Other taxes imposed by Philadelphia include the Vehicle Rental Tax, the Excise Tax on Outdoor Advertising Transactions, and the Tobacco and Tobacco-Related Products Tax. See generally PHILA., PA., CODE tit. 19 (governing finance, taxes, and collections). 8. See, e.g., 1Pt1 MATTHEWS MUNICIPAL ORDINANCES § 1A:2 (2d ed. 2018) (not- ing that a municipality’s inherent lack of power is “practically a universal rule in all 50 states”). 9. See, e.g., United Tavern Owners v. Sch. Dist. of Phila, 272 A.2d 868, 870 (Pa. 1970) (plurality opinion) (restating that local governments have no authority apart from that which is granted by a state legislature). 10. See, e.g., 1Pt1 MATTHEWS MUNICIPAL ORDINANCES § 2:3 (2d ed. 2018) (“[I]n case of conflict between an ordinance and a state law, the latter prevails.”); 5 MCQUILLIN: THE LAW OF MUNICIPAL CORPORATIONS § 15:18 (3d ed. 2018) (“It is fundamental that municipal ordinances are inferior in status and subordinate to the laws of the state.”). https://digitalcommons.law.villanova.edu/vlr/vol64/iss1/5 2 Morgan: The Coca-Cola Capitation Conundrum: The Supreme Court of Pennsylv 2019] NOTE 139 routinely invoke this principle to argue that state law preempts the local ordinance.11 In Pennsylvania, the Sterling Act and the Local Tax Enabling Act pri- marily govern the power of local municipalities to levy taxes.12 Appropri- ately known as the “Tax Anything Act,” these laws empower municipalities with the authority to impose taxes on anything the Commonwealth does not already tax.13 Thus, a local tax is preempted if it is merely a duplicate of an existing Commonwealth tax.14 In the more than seven decades since its inception, the Sterling Act has been the focal point of numerous legal challenges to Philadelphia’s authority to levy taxes.15 Unfortunately, the existing body of case law interpreting municipal taxation power under the Sterling Act lacks the cohesion necessary for predictable and consis- tent boundaries on local tax power.16 11. See, e.g., 24 FLA. PRAC., FLORIDA MUNICIPAL LAW AND PRACTICE § 3:10 (2018) (“A Florida municipality may not make any law on a matter preempted to the state or county government by the Florida Constitution, by general law, or pursuant to a county charter.”). See generally 16 MCQUILLIN: THE LAW OF MUNICI- PAL CORPORATIONS § 44:222 (3d ed. 2018) (listing pursuit of injunction as a rem- edy against taxes forbidden by law). 12. See 53 PA. STAT. AND CONS. STAT. ANN. §§ 15971–15976 (West 2018) (codi- fying the Sterling Act). The Sterling Act applies only to “cities of the first class,” which is a municipality with a population of at least one million residents. See 53 PA. STAT AND CONS. STAT. ANN. § 101 (West 2018) (defining different classes of cities); 53 PA. STAT. AND CONS. STAT. ANN. §§ 15971–15976 (West 2018). Philadel- phia is the only city in Pennsylvania qualifying as a city of the first class. See 53 PA. STAT. AND CONS. STAT. ANN. §§ 6924.101–6924.901 (West 2018) (codifying the Lo- cal Tax Enabling Act). The Local Tax Enabling Act applies virtually everywhere in Pennsylvania besides Philadelphia, to: [C]ities of the second class, cities of the second class A, cities of the third class, boroughs, towns, townships of the first class, townships of the sec- ond class, school districts of the second class, school districts of the third class, and school districts of the fourth class, in all cases including inde- pendent school districts.