Despite critics’ warnings that Philadelphia’s 1.5 cent-an-ounce sweet-drinks tax could drive jobs out of the city, Philadelphia Department of Revenue data show that wage-tax collections from beverage-related businesses actually rose in the first three months of 2017 after the tax began, compared with a year earlier.
Wage taxes paid by restaurant and beverage industry employers were up a total of 14 percent, to $23.4 million, compared with $20.5 million in first-quarter 2016. The first quarter is typically the year’s slowest, with business increasing in the summer and again in the Christmas season.
Business payroll rose in 11 of 15 industry categories, compared with a year ago. The biggest increase was in the largest sector, food concessionaires, which tends to vary from quarter to quarter with convention and pro sports schedules. They accounted for a little more than half the total increase.
Taxable wages also rose 10 percent or more in bars and taverns, full-service restaurants, take-out restaurants, specialty grocers, wholesale grocers, and even at soda and ice manufacturers. Wages rose by single digits for retail supermarkets, drugstores, department stores, and vending machines. Wages declined by single digits at convenience stores, caterers, and food trucks — and by 13 percent at “miscellaneous food service,” one of the smallest categories.
City officials took the strong job numbers as a sign that the tax, which began Jan. 1, has not damaged employment, as store owners and lobbyists for Coca-Cola, Pepsi, and other suppliers of sugary and artificially sweetened drinks had warned. The tax has also funded the city’s expanded pre-kindergarten program.
“The beverage industry’s rhetoric over job loss simply does not match reality,” said city Commerce Director Harold Epps. Rising wage-tax collections “shows that the industries who rely heavily on beverage sales have not had to cut jobs or hours anywhere near the rates they’ve claimed.”
“No amount of rhetoric from the administration can obscure the fact that Philadelphia’s beverage tax has cost hundreds of union employees their jobs, from teamsters to supermarket employees,” responded Anthony Campisi, a spokesman for Ax the Philly Bev Tax, which represents soda company operators who have been demanding a repeal of the tax.
Campisi said supermarket layoffs following the tax might have been masked by ShopRite operator Jeff Brown’s opening of a new store in West Philadelphia during the quarter. Campisi also noted that the Canada Dry plant in Pennsauken, which services Philadelphia, has “cut back” in response to the city tax. The Pepsi plants in Northeast Philadelphia, South Philadelphia, and Wilmington announced a total of 80 to 100 layoffs on March 1.
Many of the layoffs occurred in the second quarter so they may not be counted yet, Campisi said. And severance packages for laid-off workers would also cause payroll to rise in the short term, he added.
The industries included in the analysis skewed the results, Campisi added. Department stores and retail drug stores sell a lot more than beverages and probably should be excluded, he said. Convenience stores and caterers, meanwhile, saw a small decline.
“Respectfully, their argument makes no sense,” said city spokesman Mike Dunn. “Supermarkets sell a lot more products than beverages, and yet Campisi has long touted them as victims of the tax. Should grocery stores also be excluded?”
Dunn said “severance is subject to the wage tax. Keep in mind, however, that this an industry that does not historically provide much, if any, severance — except at the highest levels of management.”