Since a $2-per-pack cigarette tax to benefit Philadelphia schools began in the city in October, the tax has brought in $36.5 million in revenue to the district — putting the income on par to meet or exceed projections.
Mayor Michael Nutter proposed the cigarette tax — it had to be passed through the state legislature with the backing of Sen. Anthony Hardy Williams — and, at the time, his office estimated the new tax could bring in $83 million to the school district in its first year if implemented by July 1st at the beginning of the fiscal year.
But the legislature dragged their feet on the bill, and it ultimately wasn’t implemented until October 1. The district then reported the tax would bring in $49 million this year if implemented by October, or in about nine months total. The revenue already brought in puts the district on par with meeting or exceeding those nine-month projections.
In addition, these revenues reported include the winter months when cigarette sales are lower than in the summer months. (Wanna stand in the bitter cold and light up? Didn’t think so.)
Here’s a breakdown of the revenues brought in month-by-month (in millions), according to the state Department of Revenue:
Department of Revenue information specialist Maia Warren said the money raised through taxes are collected and then distributed to the city and the school district by the 10th of the next month.
The revenue coming close to meeting projections is welcome news for the cash-strapped school district that threatened 1,300 layoffs, increased class sizes and combined grade-level classes if the state legislature didn’t pass the city-wide cigarette tax. The tax revenue, which was backed by Superintendent William Hite and Nutter, was difficult to project since the city had nothing to base it on — it hadn’t already taxed cigarettes.
According to Newsworks, the district built their projections based on a regional health survey of 4,000 adults that was conducted by a nonprofit. The Department of Public Health says about 275,000 adults — or 23 percent of Philadelphians — smoke on a regular basis.
The city then formulated projections based around how many packs a day these smokers buy, while taking into account that a $2-per-pack tax hike would cause some people to kick the habit. Officials estimated the number of smokers in the city would decline by about 5 percent in the first three years due to people quitting.
On top of that, the city also took into account a higher rate of black market sales, i.e. loosies being sold tax-free on the streets.
In the future, the city estimates the cigarette tax will bring in less and less money because of people quitting due to the price. Newsworks reports the estimations are as follow:
FY15: $83.2M (that was if implemented by July 1st — it wasn’t. It was implemented in October.)
FY16: 77.5M
FY17: 75.1M
FY18: 73.9M
FY19: 72.7M
Still, this new tax in Philadelphia will last until at least 2019, and is bringing in funds to the district that are in addition to an extra $120 million through an increased sales tax in the city limits. Both taxes required approval from the legislature and the cooperation of the state Department of Revenue.
