When Philadelphia’s liquor-by-the-drink tax went into effect in 1995, critics said it would lead to a drought in business.
Mayor Michael Nutter told reporters this week he is “interested” in exploring the possibility of hiking the 10 percent tax on alcoholic drinks in order to raise money for the cash-strapped schools.
So how did the tax ultimately impact bars and restaurants?
Patrick Conway, president of the Pennsylvania Restaurant and Lodging Association, said it has been a burden.
“The drink tax of 10 percent already creates an unlevel playing field with businesses in surrounding counties,” he said. “It’s really just one more anti-business measure that makes it difficult for restaurants to invest in the city.”
Since 1994, the number of restaurants with active liquor licenses has dropped to 1,458 from 2,148, according to the Pennsylvania Liquor Control Board. Conway said the tax is probably partly to blame.
Conway said the rise of BYOBs in Philadelphia could also be partly attributed to the tax.
Sharon Ward, executive director of the liberal-leaning Pennsylvania Budget and Policy Center, had a different take on it.
She pointed out that “the number of drinking establishments in Philadelphia, as a share of the total in Pennsylvania, has stayed pretty steady” since 2001, according to the U.S. Bureau of Labor Statistics. “That was the last year that we could get the data.”
Michael Wood, research director of the Pennsylvania Budget and Policy Center, said that if any businesses would be affected by the tax, it would be drinking establishments. They primarily make money by selling alcoholic drinks, as opposed to restaurants, which sell food but can also choose to serve alcohol.
The number of employees working at drinking establishments has also slightly increased since 2001, according to the BLS.
“So people can sit back, relax and have another drink,” Ward said. “Because there will likely be little impact on either establishments or employment because of this new tax, but it will raise dollars that are critically needed by the school district.”
In fiscal year 1996, Philadelphia raised about $19 million for the school district from the liquor-by-the-drink tax. Last fiscal year, the tax brought in more than $49 million.