The Economic Impact of the Philadelphia Beverage Tax

Purpose of Conducting Beverage Tax Survey

Throughout his tenure as Philadelphia’s fiscal watchdog, City Controller Alan Butkovitz has made it a priority to understand the barriers faced by businesses in terms of daily operations as well as the broader business climate. Since the Philadelphia Beverage Tax is an unusual levy on a single category of
product that cuts across many segments of the retail sector, the Controller’s Office decided to survey businesses to get a sense of the impact of the tax at the neighborhood level, from the perspective of individual business owners.

Data and Methodology

The Controller’s Office contacted approximately 1,600 businesses throughout the City, reaching more than 50 commercial corridors over a four-week period. The majority of surveys were collected in the field through street teams consisting of staff from the City Controller’s Office. Additionally, surveys were completed via telephone by contacting registered businesses within the City and some surveys were completed online through the survey link. The survey asked businesses to assess their 2017 revenues from Quarter 3 and Quarter 4 in comparison to the same two quarters of 2016. This included the revenues from the period of January through June. The survey also asked questions that identified any issues impacting sales as well as the future outlook for the business due to the new tax.

Findings

Of the 1,600 businesses contacted to participate in the survey, 741, or almost half, agreed to complete the questionnaire. Some of the findings from the businesses’ responses included the following:

  • 88% of businesses reported Year-to-Year revenue losses, with 57% reporting losses in excess of 10%
  • 62% of businesses attributed “most” or “all” of the decline in revenue to the implementation of the Beverage Tax.
  • 40% of businesses surveyed indicated they would have to make “significant changes to keep the doors open.”

Conclusion

Based on the responses provided from the various business sectors across the City of Philadelphia and a prior study on the impact of wages reported by grocery store owners, the City Controller’s economic analysis continues to indicate that the Beverage Tax has needlessly impacted specific businesses in the city.

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