Now the City Wants to Tax You Even More to Drink Alcohol

Mayor Michael Nutter and City Council President Darrell Clarke are leaning toward raising the tax you pay when you drink in bars and restaurants. Their logic: hiking the “liquor-by-the-drink” tax from 10 percent to 15 percent will help meet the School Reform Commission’s request for $60 million in additional funding. (Every 50 cents you pay for a five-dollar beer already goes to public schools.) In 2012, the city made $49 million from the tax; at 15 percent, it would have raked in about $73 million.

Or would it have?

In 2008, Ed Rendell appeared on a Pittsburgh-area radio station to talk about Allegheny County’s then-new liquor-by-the-drink tax (Philly’s has been in place since 1995), and said: “We don’t quite enforce in the neighborhood taverns as well as we do in the big hotels and restaurants.” When the host asked him if “You look the other way,” the governor responded: “Um, you can say that.”

The numbers bear him out. Since 1995, according to the City Controller’s Office, $34 million in liquor-by-the-drink taxes have gone uncollected. Why? Seems Rendell was onto something: A 2001 report by the Controller concluded that of the city’s 2,200 liquor licenses (there are now 1,440) only 1,300-1,500 were actively paying taxes.

“It’s not clear whether the city has intentionally or sloppily not collected from certain people,” says tax reform advocate and City Controller candidate Brett Mandel. “But it definitely is a fact that not all liquor-by-the-drink taxes are being collected” in Philadelphia. Might be something for the city’s brand new tax collection czar Thomas Knudsen to look into.

For more, see Victor Fiorillo’s 2012 roundup on the tens of millions in various uncollected city taxes.