PHILADELPHIA — Philadelphia freedom isn’t shining on local businesses. Instead, the shadow of big government is covering the city, according to about 50 local retailers who piled into a hearing Tuesday to voice their concerns about the way the city is taxing and regulating tobacco and other products.
At the top of the list of complaints were city council-imposed soda and tobacco taxes and new regulations on tobacco shops mandated by the unelected Board of Health Regulations.
“I came here to invest and buy a business,” said Maqbool Khokhar, a 7/11 franchise owner, who told Watchdog.org he came to Philadelphia from New Jersey, only to be confronted with the kind of heavy regulation and taxes he thought he was escaping.
The new retailer regulations restricted the number and location of tobacco sellers. It barred new licenses for shops within 500 feet of schools, created new density requirements that allow one tobacco retailer for every 1,000 residents in each planning district, and prohibited new permits in high-density districts even if a current businesses owner wished to transfer or sell his business to another person.
Twelve of Philadelphia’s 18 planning districts are considered high-density, so the new regulation closes off any new competition in the market in two-thirds of the planning districts.
Hassan Haq, who owns a Lukoil gas station in the city, said the soda and cigarette taxes were already hurting his business. The regulations could mean he won’t be able to sell it. It is “a discouraging action,” he said.
Philadelphia implemented a $2 a pack cigarette tax in October 2014, and followed that with a 1.5 cents per ounce tax on sugary drinks approved last summer that is already causing many business owners to contemplate layoffs. In 2016, the state raised its cigarette tax to $2.60 per pack. Combined, the total tax of $4.60 on a pack of cigarettes in Philadelphia is the third highest among big cities.
Singh Balwinger owns a 7/11 near the border with Montgomery County. Because businesses outside of the city aren’t affected by the new taxes, he said, he has lost about 45 percent of his business.
In December, the Board of Health voted to adopt the tobacco retailer regulations that took effect in January.
Philadelphia Controller Alan Butkovitz told the council that 500 local businesses would be affected by the new regulations, which he said “substantially decrease the … value of the store” because the owners cannot transfer their license to sell tobacco.
City health officials say they’re doing it for the children.
Cheryl Bettigole, director of chronic disease prevention at the Department of Public Health, said teens are heavily influenced by seeing cigarettes in stores, which is why the department wants to stop sales near schools. She told the council that the “death toll” of tobacco justified the “reasonable” limits imposed.
Butkovitz wondered how far “reasonable” might be stretched. Could the department or the council ban pizza because of the possible health effects? What about regulating hotels in which a person might “have sex with more than one person,” which might also pose a public health threat, he asked.
Andrew Teitelman, a lawyer who represents local businesses, acknowledged the health concerns about tobacco — he didn’t mention pizza or hotel sex — but said the regulations were rushed into place without giving due consideration to the concerns of retailers.
“Table this regulation,” he told the council. “Stop it. Freeze it.”
Tom Briant, executive director and legal counsel for the National Association of Tobacco Outlets, said the new regs are shooting at the wrong target anyway.
Citing research from the FDA and NIH, Briant told Watchdog.org that 86 percent of minors who use tobacco get it from “older siblings, adult-age friends, parents and even strangers to whom they give money to buy them tobacco products.”
At the hearing, Briant said that law enforcement should be focusing on these so-called “social sources” issue instead of targeting retailers, most of whom obey the law.
One local business owner told the council that he has had two employees sell to minors in nine years of business. Both were fired, he added.
Butkovitz said the people struggling are “not multi-billionaires,” but rather small Philadelphia business owners.
“I see people who struggled night and day,” he said. “I guess they’re bad people because they sold a legal product.”