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Alcohol tax hurdles bar: House, Senate measures move ahead in Annapolis

www.SoMdNews.com
By SARAH BREITENBACH
Staff writer

ANNAPOLIS — Lobbyist Vincent DeMarco doesn’t care how it happened — what matters to him, he said, is that one of the General Assembly’s chambers approved an increase in alcohol taxes.

The Senate’s tax hike, which passed earlier this week and could create a separate sales tax for alcohol, ratcheting the rate from 6 percent to 9 percent over the next three years, isn’t the dime-a-drink excise tax DeMarco has championed since the election, though he considered the move historic nonetheless.

“There’s no disappointment here because the public health benefit is there,” said DeMarco, who is president of the Maryland Citizens’ Health Initiative, a nonprofit focused on increased access to health care. “People’s lives are going to be saved.”

The House of Delegates did not include the alcohol sales tax increase in its budget, which means it needs to be approved in a conference committee by members from both chambers.

Even if the tax does not raise as much as the initial proposal, if passed it will mean that people will consume less alcohol because of the added expense and will be less likely to drink and drive or experience health-related problems, DeMarco said.

An original excise tax proposal — which was sponsored primarily by Dels. James W. Hubbard (D-Prince George’s) and Justin D. Ross (D-Prince George’s) and Sens. Verna L. Jones-Rodwell (D-Baltimore County) and Richard S. Madaleno Jr. (D-Montgomery) — would have funneled more than $200 million to disability support services and other health care funds for addiction treatment, tobacco use prevention, mental health care and Medicaid.

Legislators shelved that plan in favor of the sales tax increase, which had the support of Senate President Thomas V. Mike Miller Jr. (D-Calvert, Prince George’s), whose family owns a liquor store in Clinton.

In the first year, the tax would provide $5 million to those on a Developmental Disabilities Association waiting list in fiscal 2012. That amount increases to $10 million and $15 million in the following two years, respectively.

Of the $29 million the tax increase is expected to generate next year, $21 million would be directed to Prince George’s County and Baltimore schools to account for funding shortages.

It wasn’t until halfway through the session that DeMarco and legislators realized that raising the sales tax — rather than the excise tax per gallon of beer, liquor or wine — was an option.

Washington, D.C., is the only jurisdiction in the region that has a separate sales tax for alcohol. The District charges 9 percent on alcohol that will be consumed off-site and 10 percent for on-site consumption in bars and restaurants.

Restaurant owners already have had their margins cut low by a down economy and rising global food prices, said Paul Bales, owner of The Crossing at Casey Jones in La Plata and member of the Restaurant Association of Maryland.

“This is just one more tax that the small independent restaurants and anybody else has to absorb,” he said. “Our costs all around have already gone up and this is just one more hit.”

Charlie Ayers, who owns Colonial Liquors in La Plata, said he thinks the tax increase could drive customers away altogether.

“People are not going to be able to afford their beer and liquor anymore. It’s getting too high,” he said. “People just aren’t going to be able to buy, or they’re going to start making their own. They’re doing the same thing they did with cigarettes, just making them too expensive.”

Jack Milani, legislative director for Maryland State Licensed Beverage Association, said alcohol retailers would have preferred no tax at all, but the sales tax would be much easier to swallow than an excise tax.

Alcohol distributors and retailers adamantly opposed the excise tax, which they said would have been imposed at the wholesale level and passed down to consumers.

“If it’s going to go up, it certainly would be better for the folks on the D.C. borders,” Milani said. “[Near] Delaware with no sales tax, it probably doesn’t bode well.”

In parts of the state with easy access to Pennsylvania and West Virginia, where the sales tax is 6 percent, and Virginia, where it is 5 percent, people would travel to purchase alcohol and subsequently hurt Maryland retailers, said Sen. David R. Brinkley (R-Carroll, Frederick).

“This might be the first step as they turn and say, ‘Let’s hike the sales tax somewhere else,'” Brinkley said.

The bill is also a bait and switch, Brinkley said, promising significantly less money to community services.

Even though disabilities advocates would receive significantly less funding than under the excise tax proposal, they are grateful, said Laura Howell, executive director for the Maryland Association of Community Services.

The money generated by the sales tax would help to get 5,300 off the Developmental Disabilities Association waiting list, Howell said.

“Clearly the Senate had a different plan,” Howell said. “We are certainly grateful that they made such a commitment to people on the DDA waiting list.”

sbreitenbach@gazette.net

Staff writer Jeff Newman contributed to this report.