Philadelphia’s sin and sweet taxes yielded Pennsylvania’s largest city more than $500 million in revenue over the last five years, according to a new economic report.
City Controller Alan Butkovitz released data last week showing Philadelphia collected $313 million in liquor tax revenue from the 2013 to 2017 fiscal years and $156 million from a cigarette tax enacted three years ago. A new 1.5 cent per ounce tax on all sweetened beverages that began in early 2017 generated $32 million through June 30.
The liquor and cigarette tax revenues are remitted directly to the School District of Philadelphia. The sweetened beverage tax is recorded in the city’s general fund and earmarked for pre-kindergarten expansion along with debt service for $300 million in planned bonds to upgrade parks, libraries and recreation centers.
Butkovitz noted that the liquor tax increased 40% in the last five years to $73.2 million in 2017 from $52.9 million in 2013. The 10% tax applies to the sale of alcoholic beverages at business establishments such as restaurants, bars, clubs and hotels.
“The growth in tourism combined with the ongoing success of beer gardens have contributed to the boost in Liquor by the Drink sales,” said Butkovitz in a statement. “Not only has the City realized the advantages but it has embraced the concept by continuing with its creative ‘Parks on Tap’ this summer.”
The city’s $2-per-pack tax for cigarettes and little cigars totaled $47.4 million in revenue for the current year, a 20% year-over-year drop. The school district and Pennsylvania lawmakers have an agreement in place to recover revenues when collections fall short of projections.
“Under state law, if local revenues from the city’s portion of the cigarette tax do not reach $58 million, the state will cover the difference,” said Butkovitz.
Philadelphia city officials are estimating that taxes will derive roughly 75% of general fund revenues for the 2018 fiscal year under a five year financial plan approved last month by the Pennsylvania Intergovernmental Cooperation Authority. The city’s general obligation bonds are rated A2 by Moody’s Investors Service and A-minus by S&P Global Ratings and Fitch Ratings.