Pittsburgh Citizens Launch a New Tax Rebellion

Published September 1, 2008

Hundreds of citizens of Pittsburgh and surrounding Allegheny County, Pennsylvania have launched a campaign they call “Whiskey Rebellion II” to place on the November ballot a referendum to remove a 10 percent tax on alcoholic drinks.

The drink tax and a $2 a day tax on car rentals were imposed January 1 by Allegheny County officials. County Chief Executive Dan Onorato pushed for the taxes, which he estimated would bring in $40 million for the local port authority, which runs the mass transit system for Pittsburgh and surrounding areas. The drink tax alone was expected to generate $30 million in revenue.

The most vocal opposition is coming from bar and restaurant owners who must charge the drink tax and customers who must pay it, said Cris Hoel, general counsel for Friends Against Counterproductive Taxation (FACT), an organization made up largely of hospitality industry business owners who say they are being hurt by the tax.

‘Impact Never Considered’

“The folks who enacted this tax never considered the economic impact,” said Hoel. “If restaurants could have collected an additional 10 percent on drinks without losing business, they would have done it. This tax is diminishing business about 5 percent. These tax remittances are gained at a terrible cost and in some cases a counterproductive cost.”

Hoel said he has represented hospitality industry businesses for more than 20 years, and in the 1990s he was chairman of the American Bar Association’s Committee on Alcohol Beverage Practices.

County spokesman Kevin Evanto said the county would have to raise property taxes without the drink and rental car taxes. The money from those taxes is being dedicated to mass transit.

First Dedicated Revenue

“It’s the first time we have ever had taxes dedicated for transit,” Evanto said. “Since 1964 Allegheny County has provided property tax money to the local port authority” to receive matching state and federal transit funds.

Last year county officials asked state lawmakers for permission to use alternative revenues. Lawmakers responded with a bill giving the county the authority to impose taxes on alcoholic drinks and rental cars.

“We were able to use the $30 million in property tax that we had been spending on mass transit to balance the budget,” Evanto said. “Health costs for us are going up tremendously every year. If the drink tax goes away, that $30 million will come out of property taxes, which will necessitate a tax increase.”

Hoel said the tax would not go away entirely under the FACT-inspired referendum. The group seeks to cut it to one-half of 1 percent, which would be expected to bring in about $2 million per year. The group chose not to try to eliminate the tax because there is some legal question over whether that may be done by referendum.

Drink Tax or Property Tax

Any reduction in drink tax revenue would necessitate a property tax increase, Evanto said.

“As we’re talking to voters and explaining the situation, people understand,” Evanto said. “We understand why restaurant and bar owners are opposed to it, but there’s no getting away from property taxes. A lot of people view the drink tax as something they can choose to pay.”

Hoel said FACT expects to collect about twice the 24,000 signatures needed to get the measure on the ballot.

“The Allegheny County experience is a useful example of how citizens can respond when government goes too far,” Hoel said. “It’s fitting this is occurring in Western Pennsylvania, which fought the Whiskey Rebellion of 1794. The tax opposed by the whiskey rebels lasted a few more years and was repealed.”

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.