Proponents of raising excise tax on alcohol minimize impact while opponents predict doom for the beverage industry
January 23, 2011

The proposed “dime a drink” increase in Maryland’s alcohol excise taxes, which proponents believe has a chance of passing the legislature this year, has both opponents and advocates buzzing.

The name is somewhat misleading, as the tax would be charged on bottles of liquor rather than collected as a separate sales tax on individual drinks. The “dime” refers to the estimated additional cost per drink, on average.

Retailers and wholesalers that sell distilled spirits in Maryland are, predictably, mounting a fierce opposition to the proposal. As with most things, there are creative ways to use the same (and accurate) numbers and percentages to present arguments supporting both sides.

Jay Hibbard, the vice president of the Distilled Spirits Council, said the nomenclature is absurd because it “severely punishes businesses that purchase alcohol in cases” because that “dime a drink” translates to dollars per bottle. Hibbard also predicted passage of the tax increase would force “thousands of waiters, waitresses, bartenders and busboys into the unemployment line.”

On the other hand, proponents estimated that revenue from the increase will be $215 million annually, also saying it would cut liquor consumption and save the state $225 million in costs associated with alcohol abuse and drunken driving. The proceeds would, according to proponents, be used to fund health care coverage, disability services, substance abuse treatment and prevention, and mental health services.

The spin being employed by both sides is obvious.

While the tax would not be collected directly from consumers at the point of sale,saying it would put bars and restaurants out of business is specious. Clearly, that expense would be passed on to consumers, who would presumably pay, on average, an additional 10 cents per drink. Who, after all, while planning an evening out, would think, “Gee, I can afford two drinks at $8 apiece, but that additional 10 cents per drink brings it up to $8.20. I guess I’ll have to stop at one drink, or maybe skip the cocktails altogether.”

On the other hand, a tax increase of 700 to 1,300 percent is — there’s no other way to state it — outrageous.

Before jumping on either bandwagon, however, consider that Maryland’s excise tax rates on distilled spirits, at $1.50 per gallon, are among the lowest in the nation. The five highest state tax rates range from $26.45 to $13.39 per gallon. Compare this also to neighboring states: Delaware, $5.46 per gallon; Virginia, $20.13 per gallon; and the District of Columbia, $1.50.

Arguments that a tax hike that will both increase revenue to the state as well as decrease use of the product being taxed confuse the issue.

If raising this user tax will increase state revenue, with a minimal effect on consumers and without placing the state at a competitive disadvantage — then it merits implementation. If the revenue is earmarked for specific needs –in this case, health-related services –that strengthens the proponents’ case.

Lobbyists on both sides will continue to present the facts in ways that strengthen their particular positions. Lawmakers must set those arguments aside and consider any such legislation on the basis of facts alone –will it increase state revenue, will the money be dedicated to meeting real needs in the state and how it will impact businesses and jobs.

Last modified: January 24, 2011