Has soda tax led to job cuts in Philly? It depends who you ask

Soda Tax
Mayor Kenney’s administration and Controller Alan Butkovitz traded jabs Monday from opposing sides of the debate over Philadelphia’s controversial tax on sweetened beverages.

Mayor Kenney’s administration sought to claim a victory Monday in the ongoing fight over Philadelphia’s sweetened beverage tax: Wage tax collections suggest that the beverage industry has not lost jobs due to the drink levy, officials said.

Hours later, Controller Alan Butkovitz fired back with criticisms of the so-called soda tax — and the city’s assessment of its own wage tax data. The numbers were not detailed enough to prove that jobs weren’t lost, he said, and the beverage tax would not have even been necessary if the city had not decreased the wage tax.

The exchange marked the latest skirmish over the controversial tax. Since the 1.5-cents-per-ounce levy on sweetened beverages went into effect in January to fund pre-K, community schools, and other programs, its supporters and detractors have been scrambling for statistics to bolster their positions. In addition to analyzing wage tax data Monday, both the mayor’s office and Butkovitz released reports about the economic impact of the beverage tax.

By releasing wage tax collection data Monday, the Kenney administration offered a response to an often-repeated claim by the beverage industry that the tax has led to layoffs and hours reductions for employees.

In the first six months of the tax, wage tax collections from beverage-related jobs is 5.8 percent more than the same period last year, Kenney’s office said. Included in the sector that saw that increase in wage tax revenue are supermarkets, convenience stores, restaurants, bars, department stores and superstores, vending machine companies, and wholesale grocery stores.

“Repeated claims about job loss because of the beverage tax are not borne out by the wage tax collections in that sector,” Revenue Commissioner Frank Breslin said in a news release. “The collections are not just steady, they are growing, and growing at a stronger pace than all sectors combined.”

But Butkovitz issued his own statement Monday afternoon, suggesting that the city’s claims were misleading because wage tax data are not detailed enough to distinguish whether it was collected from people who work in the city, or Philadelphia residents who have jobs outside the city.

“It cannot be concluded that a growing wage tax means there are no job losses within Philadelphia retailers,” Butkovitz said.

Butkovitz has been a critic of the beverage tax. He met met with the American Beverage Association before a May primary race to keep his seat. He lost that race to Rebecca Rhynhart, a former aide to Kenney. Earlier this month, Butkovitz announced that he would conduct a survey of business owners to gather more statistics about the tax’s impact.

He renewed his criticism Monday, calling the beverage tax “unnecessary.” Reductions in the city’s wage tax will decrease tax revenue by $310 million over the next five years, he said. If the wage tax had stayed the same, Butkovitz said, that money could have gone toward pre-K and other programs that the beverage tax will fund.

Mike Dunn, a spokesman for Kenney, said the beverage tax was chosen as a revenue source because it was the least harmful to the city.

“Many in Philadelphia’s business community have long held that the Wage Tax is the single greatest threat to the city’s ability to compete for jobs,” Dunn said. “The Controller seems narrowly focused on the needs of one industry to the potential detriment of the entire business community.”

The beverage industry, which continues to fight the tax, also weighed in Monday, arguing that the boost in wage tax from the beverage industry resulted from new supermarkets opening this year. Acme bought and opened five stores that closed last year as A&P filed for bankruptcy, and a new ShopRite opened in West Philadelphia, said Dave McCorkle, president emeritus of the Pennsylvania Food Merchants Association.

Meanwhile, both Butkovitz and the mayor’s office pointed to studies Monday to back up their claims about the tax.

Kenney’s office circulated a state study that showed increasing state spending on subsidized child care and free pre-K programs boosted economic activity. Those results would be duplicated in Philadelphia, said Otis Hackney, the city’s chief education officer, by allowing parents of young children to return to work and creating jobs for teachers, support staff, and contractors needed to build new classrooms.

Butkovitz, in his own study issued Monday, examined six months of sales at ShopRite and Fresh Grocer stores and found that total sales dropped 13 percent, compared with the same six months in 2016. Sales of sweetened beverages dropped 57 percent, he found. Those findings are similar to other studies about the tax’s impact. But the mayor’s office criticized the study as potentially biased, pointing to Butkovitz’s repeated criticism of the tax.