Controller Butkovitz Says Beverage Tax Unnecessary to Fund Programs

For Immediate Release
Sept. 18, 2017

Contact:  Brian Dries

Controller Butkovitz Says Beverage Tax Unnecessary to Fund Programs
Revenue loss from the Wage Tax reduction would have been more than enough to pay for new Pre-K Program

PHILADELPHIA – In addition to issuing an impact study of the Philadelphia Beverage Tax (Beverage Tax) on Philadelphia’s grocery stores, City Controller Alan Butkovitz today indicated the new tax has needlessly impacted specific businesses in the city.

Under the City’s Fiscal Year 2018-2023 Budget Plan, the Beverage Tax is projected to provide $200 million to fund the city’s new Pre-K program. The loss in revenue by reducing the Wage Tax rate is $310 million over the same five-year period.  According to Controller Butkovitz, the city had the required revenues to fund Pre-K, along with additional revenues to fund other programs, without the Beverage Tax.

“This was an unnecessary bait and switch with taxes in order to pay for new programs,” said Controller Butkovitz.  “The minimal reduction in one tax took away revenues that could have paid to fill Pre-K seats, along with money to fund other projects.

“Instead, the Beverage Tax is killing grocery businesses and is jeopardizing future access to fresh food stores in our city.”

While the city claims there have been increases in Wage Tax revenues across beverage-related industries, the City Controller’s impact study indicated that this tax is paid by all Philadelphia residents, even if they work outside the city.  Wage Tax data lacks necessary detail to distinguish between job growth in the city and Philadelphians working at higher wage jobs in the suburbs. 

“It cannot be concluded that a growing Wage Tax means there are no job losses within Philadelphia retailers,” said Controller Butkovitz.  “It is misleading by the Revenue Department to imply that grocery businesses have not been impacted because there’s been revenue growth from a particular tax.”

In addition, the City Controller’s impact study indicated that sales at major grocery stores fell 13 percent in the first six months of 2017. From the participating stores, the average sales for the period decreased from $21.1 million to $18.3 million in Philadelphia stores.

During the same period, sales from suburban stores increased by two percent and the customer count in city stores fell by 10,275 per store per month compared to suburban stores.

“Multiple reports have indicated these Philadelphia stores are losing significant sales as a result of the Beverage Tax,” said Controller Butkovitz.  “There is no business that can withstand these types of losses and continue to operate in our city.

“The jobs might be shifting to the suburbs, but it’s only a matter of time before residents discover it’s more cost effective to live closer to where they work.”