C I T Y O F P H I L A D E L P H I A

JAMES F. KENNEY
Office of the Mayor Mayor
215 City Hall
Philadelphia, PA 19107 DARRELL L. CLARKE
(215) 686-2181 President, City Council
FAX (215) 686-2180

June 11, 2018

Hon. Maria P. Donatucci

Chair, PA House of Representatives Philadelphia Delegation
101 Irvis Office Building
PO Box 202185
Harrisburg, PA 17120-2185

Hon. Christine Tartaglione

Chair, PA Senate Philadelphia Delegation
Senate Box 203002
Harrisburg, PA 17120-3002

Dear Chairwoman Donatucci and Chairwoman Tartaglione:

It has come to our attention that members of the General Assembly, and lobbyists for the beverage
industry, are discussing alternative revenue sources for the City of Philadelphia if House Bill 2241 or
other legislation is passed to preempt the City from levying the Philadelphia Beverage Tax (PBT). One
such alternative appears to be an authorized increase in Philadelphia’s Sales and Use tax from 2% to
2.5%, which would then be added to the 6% Pennsylvania Sales Tax for a total of 8.5%. We write today
to respectfully convey our position that we cannot support this proposal. We appreciate the recognition
that the programs jeopardized by preemption of the PBT merit financial support, but as we will explain,
hiking our sales tax is simply not an option for the City.

At 8%, Philadelphia’s Sales and Use tax is already substantially higher than that of its suburban
neighbors. Individuals purchasing goods in Montgomery, Bucks, and Delaware Counties are only subject
to a 6% sales tax, while individuals in New Jersey are subject to a 6.625% sales tax, recently lowered
from 7%. This new tax would have the devastating impact on the retail industry that the beverage
lobbyists now claim is caused by the PBT. The increased tax would drive individuals over the City border
to purchase goods and would have a serious negative impact on the City’s retail and hospitality sectors,
whose recent gains would be eliminated.

Additionally, we are concerned with the potential impact of this increase on existing revenues. An
increase in the sales tax, and the resulting exodus of business from Philadelphia, would negatively impact
our current sales tax revenues. Those revenues stabilize the City’s budget, provide funding to the School
District and are part of our long-term strategy of fully funding our pension system. The good news is that
the PBT has not triggered the downturn in sales tax revenues predicted by the Beverage Industry. On the
contrary, since the PBT went into effect on January 1, 2017, Philadelphia has seen no negative impact on
our sales tax revenues. In fact, sales tax revenues have increased from $290 million to $324 million.
Conversely, an increase in the sales tax rate is likely to produce diminished revenue and would force the
Administration and City Council to choose between ensuring long-term funding for employee retirement,
or funding such essential programs as PHLPreK, Community Schools or Rebuild. With the PBT, the
evidence is in: no such choice must be made.

We know the beverage industry has been lobbying hard to persuade members of the General Assembly to
eliminate Philadelphia’s authority to impose the Philadelphia Beverage Tax. We hope the General
Assembly will reject that course of action. We are convinced that replacing this carefully constructed tax
with the authority to enact a regressive sales tax hike would be devastating to the City. We cannot in good
conscience support raising our sales tax even if authorized to do so.

We respectfully ask you to oppose HB2241, and any other effort to preempt or repeal the Philadelphia
Beverage Tax.

Sincerely,

James F. Kenney Darrell L. Clarke

Mayor, City of Philadelphia President, Philadelphia City Council

CC: All Members, Philadelphia Delegation