New purpose sought for Johnstown Flood Tax
While it hasn’t exactly flooded the state’s coffers with cash, the Johnstown Flood Tax has taken on a life of its own over 82 years.
Repeal efforts have fallen flat so that the 18 percent tax on liquor continues to generate more than $300 million a year for the state’s General Fund.
A state senator thinks the tax can be put to better use.
Sen. Wayne Langerholc, R-Johnstown, plans to introduce legislation in June that would require 5.6 percent of the annual tax proceeds to be used for Johnstown and other financially distressed cities.
“My bill would restore the original intent of the Johnstown Flood Tax,” Langerholc said. “The money returned to Johnstown would aid in the economic recovery of our city and provide much needed assistance towards those efforts.”
Langerholc’s bill would dedicate a portion of the existing Johnstown Flood Tax to help municipalities designated as “financially distressed” under Act 47, the Municipalities Financial Recovery Act of 1987. Johnstown has been in the program since 1992.
Langerholc has gained several co-sponsors for the proposed legislation, Langerholc’s spokeswoman Gwenn Dando said.
“We want to bring back a small portion of (the tax) to communities that need it,” Dando said.
The tax dates back to the St. Patrick’s Day Flood of 1936 , which devastated portions of Johnstown and Pittsburgh. It had been only 47 years since the Flood of 1889, which resulted in more than 2,200 deaths in the Johnstown area.
Although the loss of life in 1936 was much smaller, the property damage exceeded $40 million, said Richard Burkert, president and CEO of the Johnstown Area Heritage Association, which operates the Johnstown Flood Museum.
In the flood’s immediate aftermath — and only three years after the repeal of Prohibition — the state Legislature passed a 10 percent tax on liquor sales to raise money for flood relief.
“They used Johnstown’s notoriety to pass an emergency tax to fund the recovery efforts for the Western Pennsylvania areas that were affected by that flood,” Burkert said. “It stayed on the books, and at some point it reverted to the General Fund.”
Made permanent in 1951, the tax was increased to 15 percent in 1963 and to 18 percent in 1968, according to the museum website .
Although only 1 percent of the General Fund, the tax’s potential for generating revenue continues to grow. In 2006, it raised $223 million; in 2017, it raised $361 million, according to the state Department of Revenue .
The proceeds are not earmarked for any particular purpose, causing some tax opponents to call for its repeal.
The Facebook group Repeal the Johnstown Flood Tax calls the tax “just one of many prohibitive regulations imposed by the state of Pennsylvania in regards to the purchase, distribution and sale of liquor in the Commonwealth.”
“It is also a microcosm of a bigger problem with government — elected officials (who) are quick to levy ‘temporary’ taxes that never seem to go away,” the repeal group said.
Group members could not be reached for comment.
Langerholc’s bill would generate about $19.3 million annually, according to Department of Revenue estimates.
The money collected by the Treasury would be distributed to the Commonwealth Financing Authority to award grants to municipalities under Act 47. The 2017-2018 budget allocated just under $2 million to those programs, Langerholc said.
“Obviously, (Langerholc) doesn’t want to take more money from people, but if we have this tax, he wants at least a portion to go to its original purpose,” Dando said. “He does feel very passionate about the fact that this was there for Johnstown, and we need it dedicated to these distressed cities.”
Stephen Huba is a Tribune-Review staff writer. Reach him at 724-850-1280, email@example.com or via Twitter @shuba_trib.
Stephen Huba is a Tribune-Review staff reporter. You can contact Stephen at 724-850-1280, firstname.lastname@example.org or via Twitter .