Judge Rules in Pittsburgh Drink Tax Case

January 5, 2009

Allegheny County Judge Judith Olson issued an injunction against the county on Friday which limits the use of the county’s alcoholic drink tax revenue exclusively to Port Authority projects. This means that county officials will not be allowed to use any of the revenue to fund road or bridge projects.

A year ago Allegheny County started collecting a new 10% tax on alcoholic drinks purchased at bars and restaurants. The tax, created to raise $32 million in matching funds for Port Authority public transit, stirred up controversy and was fought hard by groups like Friends Against Counterproductive Taxation (FACT). In late 2008 it became clear that the tax had brought in millions more than anticipated, and in response the tax was reduced from 10% to 7%.

A few weeks ago Allegheny County Councilman Charles McCullough, along with a group of local business owners, filed suit against the county in regards to the excess revenue collected. They maintain that the revenue can only legally be used for the Port Authority, which was the reason the tax was originally created. They say that roads and bridges are not public transit and so cannot be funded with the extra drink tax revenue.

Officials like County Executive Dan Onorato say that the wording of the state law that created the tax allows the revenue to be used for debt financing of road and bridge projects. Judge Olson disagrees and granted the injunction against the county limiting the use of the funds. Now the money must be kept in a separate account that can only go to the Port Authority. Since the county now has a $17 million head start on next year’s matching funds, opponents of the drink tax are pushing to have the tax lowered further to 4%. On top of that, there is still the possibility that there will be a voter referendum in May to reduce the tax to 0.5%.

We’ve written previously (here, here) on why the Pittsburgh drink tax is not sound tax policy.


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