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Measure would boost levy by 3 cents over three years

The Gazette
March 30, 2011
by Alan Brody

ANNAPOLIS — Bar tabs across Maryland might be slightly higher starting in July if the General Assembly approves a budget provision to increase the sales tax on alcoholic beverages by 50 percent over three years.

The Senate included the tax hike in its spending plan that was approved late Tuesday night, but it was not in the House budget that passed last week. Senators proposed gradually increasing the tax, which would be levied on alcohol sales at all retail establishments, from 6 cents per dollar to 9 cents per dollar by July 2013. The sales tax rate would go up to 7 percent in July and 8 percent one year later.

Budget negotiators will now decide whether to include the sales tax increase in the final spending plan agreed upon by both chambers.

When fully implemented, the higher sales tax rate would generate about $85 million a year for the state. In fiscal 2012, the bulk of the revenues would go to restoring cuts in education aid to Baltimore city and Prince George’s, Allegany and Garrett counties, with $5 million allocated to reducing the waiting list for developmental disabilities services.

More money would be dedicated to developmental disabilities in future years, with the balance going to the state’s general fund. Supporters said they will advocate for alcohol tax revenues to be put toward health care and mental health programs.

The measure falls short of what advocates initially sought in the Lorraine Sheehan Health and Community Services Act of 2011, which proposed a dime-a-drink increase on the alcoholic beverage excise tax, which had not been raised since 1972 (the tax on distilled spirits was last increased in 1955). That bill would have generated more than $200 million for developmental disabilities, but it also would have been more costly to taxpayers.

Sen. Richard S. Madaleno (D-Dist. 18) of Kensington, a chief sponsor of the proposal, said raising the sales tax was more “politically palatable” than increasing the excise tax, which could have resulted in manufacturers and distributors passing on even higher costs to customers than with a higher tax rate at the point of sale.

Vincent DeMarco, president of the Maryland Citizens’ Health Initiative, said the Senate bill would save lives and have “significant” impacts on public health and community services.

Except for Delaware, which has no sales tax on any purchases, Maryland’s neighbors impose a sales tax on alcoholic beverages.

But the Senate provision would make Maryland’s tax higher than in Pennsylvania, Virginia and West Virginia, and eventually would be on par with the District of Columbia, which assesses a 9 percent tax for off-premises sales and a 10 percent tax for on-premises sales.

Del. John L. Bohanan Jr., a leading House budget writer, expects the Senate proposal to gain favor in the House.

“I think it could be a little bit more readily accepted because it puts us on par with the District,” said Bohanan (D-Dist. 29B) of California, noting that he personally opposes the alcohol tax increase.

“I think the straight increase on the [excise] tax would have been pretty much dead over here.”