Foes release study saying drink tax will sour economy

A 10 percent tax on poured drinks in Allegheny County could cause a big economic hangover, according to a study released yesterday by opponents.

The tax has the potential to slash profits of average restaurateurs by 10 to 25 percent, cut jobs and drive struggling restaurants out of business altogether, according to a preliminary economic impact study prepared by East Liberty-based CONSAD Research Corp.

"This could be the one final nail for a lot of folks," said Kevin Joyce, statewide chair of the Pennsylvania Restaurant Association and owner of The Carlton restaurant, Downtown.

The study was commissioned by Friends Against Counterproductive Taxation (FACT), a lobbying group formed by the local hospitality industry.

It was released at a news conference before a County Council committee voted for a 2008 budget that included the drink tax and a $2-a-day tax on car rentals. It goes before the full council next week.

Both taxes have been proposed by county Chief Executive Dan Onorato to fund the county's share of mass transit.

Overall, the drink tax could cost the county's hospitality industry $18.8 million to $23 million a year in lost profits, CONSAD concluded. That estimate includes customers who would buy fewer drinks because of the tax and those, particularly big event users, who crossed county lines to do their buying.

The study predicted the tax would increase unemployment, particularly among entry-level, low-wage workers, and entice some businesses to relocate to neighboring counties. It said the tax could cut wine and hard liquor sales by 7 percent and beer sales by 3 percent.

"When you increase prices, you reduce demand," said Tom Baron, president of Big Burrito Restaurant Group and chairman of FACT.

He said restaurants and others in the hospitality industry already are reeling because of higher fuel and food prices.

Mr. Joyce and Mr. Baron are hoping the study results will persuade council to reject the drink tax.

Mr. Onorato dismissed the restaurateurs' effort as "nothing more than a publicity stunt and a bunch of predictions as opposed to real analysis." He pointed out that CONSAD itself said in a footnote it did not have time to do a comprehensive analysis.

He said his options were limited to levying the drink and car rental taxes, raising property taxes or cutting spending by $25 million to $30 million. He has vowed not to increase property taxes.

"If we keep on raising property taxes to fund everything, you can forget it. Nobody's going to want to live here," he said.

Mark Belko can be reached at or 412-263-1262.


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