A new analysis of the Philadelphia beverage tax by The Tax Foundation, a leading tax research organization, has found that the tax is “failing…amid consumer angst and revenue shortfalls.” The report warns that the tax experiment in Philadelphia should serve as a “cautionary tale” to other municipalities considering a similar tax.
According to the Tax Foundation, the Philadelphia beverage tax, which is “24 times the Pennsylvania excise tax rate on beer,” is not bringing in nearly the revenue politicians promised. Collections were millions of dollars short of projections for fiscal year 2017 which ended June 30.
Meanwhile, the tax is hitting small businesses and those who can least afford it the hardest. “Just as the city overestimated soda tax revenues, the city underestimated how much the beverage market would be impacted,” wrote the Tax Foundation. In fact, a family-run neighborhood bakery which had been in business for nearly 70 years recently closed its doors because of the tax, citing a 60 percent drop in sales since the tax went into effect Jan. 1.
The Tax Foundation says the outlook for the tax is bleak as “the actual revenue for programs remains unstable due to poor collection performance, with potential that those revenues will continue to fall.”
The evidence is clear – the Philadelphia beverage tax is an unreliable source of revenue that’s harming small businesses and families. When will Philadelphia politicians finally face the reality that their beverage tax is failing?