Tax On Alcoholic Beverages Is Too Much To Swallow

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By the Maryland State Licensed Beverage Association

Supporters of a tax increase on alcoholic beverages in Maryland usually forget to note one important detail. They’re not looking to increase the tax by 10% or 20% – or even to double it. House Bill 832, the legislation they’ve introduced, proposes a 600% to 1000% increase in the alcoholic beverage excise tax.

The most appropriate word to describe this proposal is unreasonable. For example, if you now buy a bottle of liquor that costs $13.99 with the current tax, that same bottle would cost $17.99. New taxes would add $4 to your bill, and total taxes would make up 54% of a consumer’s $17.99 cost.

That’s why, on behalf of our customers, the Maryland State Licensed Beverage Association, which consists of over 1,200 Maryland businesses holding alcohol beverage licenses – restaurants, bars, taverns and package stores – opposes House Bill 832.

Imagine a similar proposal to raise the sales tax or the income tax by 1000%. Tax increases, when appropriate, should be proportionate and incremental and used only as a last resort, because of their predictable impact on the affected industries in decreasing sales – particularly upon those retailers who are located in areas close to other states where the alcohol tax is lower.

Additionally, alcoholic beverages are one of the few items in Maryland where consumers pay two taxes—the alcohol excise tax and the sales tax. Critics who argue that the distilled spirits tax has not been raised since 1955 and the beer tax since 1972 are correct, but this argument is only a half-truth. The same critics fail to point out that the product also is subject to the additional sales tax. The consumer pays a tax (sales) on a tax (excise), because the latter cost is built into the ultimate cost at retail. Thus, alcohol not only pays it own way, but more than its own way because of this double-taxation.

Moreover, the sales tax was just increased by 20% during the 2007 Special Session. That increase, coupled with the additional tax increase proposed this year, would be a severe hit to the small businesses selling alcoholic beverages in the State, particularly those along the State's borders.

The General Assembly’s own nonpartisan analysts clearly state the effect this will have in the legislation’s fiscal note: “The alcoholic beverage tax increase will result in a decline in sales for retailers and wholesalers of alcoholic beverages. Those businesses located near the State's borders, particularly those in Montgomery and Prince George’s Counties, could be more adversely affected as customers in those areas cross the border with the District of Columbia to purchase alcoholic beverages, where the taxes will be considerably lower.”

Indeed, the sales decline for some retailers could be crippling. The burden on consumers would be unreasonable. And as our State’s economy struggles to regain its footing, a massive tax increase is the last thing small business owners and Maryland families need.
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