Allegheny County drink tax a cash cow, but despised
Revenue from levies on alcoholic beverages and rental cars to hit $41.5 million next year
November 2, 2013 1:00 AM
A bartender pours Penn Brewery's Oktoberfest beer on Sept. 12.
By Andrew McGill / Pittsburgh Post-Gazette
Six years ago, Allegheny County passed a drink tax that instantly made Dan Onorato, the county executive unlucky enough to propose it, the least popular guy in the bar.
Since then, some things haven't changed. You can still find restaurant receipts listing the county's 7 percent levy on poured booze as "The Onorato Tax." And the Port Authority, recipient of much of the revenue from it, remains on uncertain financial footing as it awaits state action on a stable long-term funding source.
But the drink tax itself is doing like gangbusters. Next year, revenue from taxes on alcoholic beverages and rental cars is budgeted to hit $41.5 million, the highest anyone's seen since 2009, when county officials cut the levy from 10 percent.
According to the county's 2014 budget proposal, the Port Authority needs only $29 million to fill its operating budget, a subsidy the county annually provides.
That leaves more than $12 million, handing Allegheny County Executive Rich Fitzgerald a hefty surplus. With the extra money, he's using $4.9 million to help the Port Authority maintain its fleet instead of issuing new debt and budgeting another $1 million to look into building a new bus rapid transit line (BRT) between Downtown and Oakland.
PG graphic: Revenues Compared (Click image for larger version)
Which is leading some politicians to ask -- with all this extra revenue, why the heck aren't we giving beer drinkers a break?
"With one swipe of the pen, you can scale back the percentage of that tax," said county council member Heather Heidelbaugh, R-Mt. Lebanon. "It was placed against the will of many for the good of all, to keep bus transportation around so people could get to work. To the extent that it's going to deviate from that, it shouldn't exist."
The drink tax is a strange creature of Pennsylvania politics, unpopular in the county but still desperately lobbied for by county leaders. When the Port Authority's budget shortfalls reached critical levels in the mid-2000s, Mr. Onorato originally wanted to use the county sales tax to balance the books.
The Republican-controlled state Legislature said no, handing him the beverage tax and a $2-a-day rental car levy instead. Between a rock and a hard place, the county Democrats took a bitter pill in exchange for keeping public transit solvent, said Robert Strauss, a professor of economics and public policy at Carnegie Mellon University.
"If you put on your good government hat and you ask how transportation should be financed, it shouldn't be a narrow excise tax," he said. "It should've been the sales tax."
Mr. Onorato got his 10 percent tax and all the derision on bar receipts that came with it. Then came the windfall: nearly $43 million between the two taxes, more than enough to pay for the transit agency's subsidy.
After a judge ruled they could only spend the revenue on Port Authority business, county council threw a bone to the county's restaurateurs and voted to lower the tax rate to 7 percent. The measure passed unanimously.
Now, Mr. Fitzgerald finds himself in much the same situation as Mr. Onorato. But though he voted to lower the tax in 2008, he's not considering another cut this year.
What happens, he asked, if revenue goes down?
"I think you need to keep it stable," he said. "There will be years that it's down. When it's up, you want to be using it for projects -- like the BRT -- that are useful."
By the looks of it, many on county council agree. Council member Jim Burn, D-Millvale, who sponsored the legislation to reduce the drink tax rate in 2008, said such a measure would have little chance of passing today.
"I don't think there's the votes to lower it," he said. "When we lowered it from 10 to 7, we believed we were keeping our word to the taxpayers. There was some discussion of going lower then. I don't believe there's any desire to do so now."
Mr. Fitzgerald views the drink levy as a critical alternative to property taxes, the only other arrow in his quiver to raise revenue. And every dollar spent on transit raises many more in state and federal matching funds, his staff said: They estimate the Port Authority could see an additional $179.18 million because of the county's investment.
That's cold comfort to Kevin Joyce, owner of The Carlton restaurant Downtown and past chairman of the Pennsylvania Restaurant & Lodging Association. Once the leader of the fight against the drink tax, he's since resigned to paying up.
He still believes the levy singles out his industry and puts him at a disadvantage to out-of-county restaurants. But he's more interested in making sure the tax stays at 7 percent and doesn't spike again.
And after butting heads with Mr. Onorato, he's in no mood to go at it with Mr. Fitzgerald.
"I'm not looking to tangle with another county executive," he said. "I still have bruises from the last bout."
Andrew McGill: firstname.lastname@example.org or 412-263-1497.
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