Alcohol sales in Pennsylvania still being taxed stemming from Johnstown flood in 1936
Did you know that Pennsylvanians are still paying a tax on alcohol that was meant to be temporary to help support relief from the Johnstown flood of 1936?
Is there such a thing as a temporary tax? They are rare because often, temporary taxes have a way of sticking around.
That is the case for the Johnstown Flood Tax that you may be paying today and not even realizing it.
There are big dollars involved here, far beyond the original intent of the tax.
The Johnstown flood of 1936 was devastating, claiming 25 lives and leaving behind $41 million in damage. Enter the Johnstown Flood Tax.
"Initially, it was designed to help address the Johnstown situation," said Senator Jay Costa, who represents Pennsylvania's 43rd district.
The 10% tax was placed on wine and spirits right at the end of prohibition.
"Applying a tax to the consumption of alcohol was something that I think people thought, well, yeah, it's not a bad idea," Costa said.
Within six years, Costa says the money to rebuild Johnstown had been raised, but the tax remained.
"Once the Johnstown issue was resolved, the tax continued to go into the general fund, as it does today," Costa said.
Not only did the tax continue. It grew.
"Gradually, in the 60s or so, increased to 15% and to 18%," Costa said.
That 18% tax still stands today.
"The biggest reason is it generates a lot of money," Costa said. "It generates in excess of almost $500 million a year in revenue to the Commonwealth that we would have to defer or not have in place, and which obviously would result in a significant loss of revenue. That's probably one of the biggest reasons why."
It's a sin tax that alcohol consumers don't even realize they're paying.
"That tax is then incorporated into the retail price that the state store charges," Costa said.
In other words, it's part of the shelf price and members of the Pennsylvania legislature have repeatedly tried to get the tax repealed.
"None of these measures over the years that I've been there have really garnered any support or any legs, primarily because of the significant loss of revenue," Costs said. "We're talking about a half a billion dollars in potential lost revenue."
While Costa says it might make sense to somehow show the tax for transparency purposes, revoking it doesn't seem like anything that will be changing anytime soon.