New alcohol tax idea emerges
Lawmakers have been weighing whether to raise the tax on alcoholic beverages since the first day of this year's legislative session. But the idea is getting a fresh look in recent weeks -- with a twist.
Health advocates recently learned that DC imposes a "special sales tax" on alcohol, charging an extra 3-4 percent on top of the regular 6 percent sales tax rate. Maryland, they argue, should follow the District's lead and develop its own special sales tax for alcohol.
The new proposal comes as the General Assembly is getting into the nitty gritty of Gov. Martin O'Malley's $14 billion general fund budget. Revenue increases are considered separately from the budget, but they generally go hand in hand.
Previously, efforts to increase Maryland's alcohol costs have focused on raising the excise tax, which is levied at the wholesale level. For decades, the excise tax on alcohol has been identical in DC and Maryland, and Maryland's liquor lobby said that changing it here could push consumers across the border to purchase in DC.
Liquor industry officials have testified in legislative hearings that wholesalers pass along the excise tax -- and a percentage markup -- to retailers. Then, retailers pass along that charge (and then some) to the consumer.
Until recently, alcohol tax advocates -- and lawmakers -- seemed largely unaware that DC also taxes at the consumer level. A sales tax increase would eliminate the mystery of how much wholesalers and retailers will mark up their products.
"For 20 years, it's been the most powerful argument, that we shouldn't mess up that equilibrium, said Vincent DeMarco, president of the Maryland Citizens' Health Initiative, who has long advocated for increasing the alcohol tax. "But as we now know, all along, DC has actually has a higher alcohol tax, erasing that argument."
Liquor lobbyists said they would prefer no tax increase at all, but said they were reviewing this latest proposal and see it as a sign that lawmakers are cognizant of competition along the borders.
Jack Milani, legislative co-chairman of the Maryland State Licensed Beverage Retailers, said the fact that DC has a special sales tax might reassure Maryland retailers "that they won't be as negatively impacted" if one is imposed here.
DeMarco, who has lobbied for several years about raising the price of alcohol, said he was "humbled and embarrassed" to learn about DC's extra tax at this late date.
Two key lawmakers -- Sen. Edward Kasemeyer and Del. C. William Frick -- said they, too, only found out about DC's alcohol tax approach in recent weeks.
"We could be open to something along those lines," Kasemeyer said Thursday. The Democrat heads the Senate's Budget and Taxation Committee. "It's a new alternative."
Senate Democrats learned about DC's sales tax structure at a March 1 presentation by the Department of Legislative Services, documents show.
Frick, chairman of the revenues subcommittee of the Ways and Means Committee in the House, also said bumping up alcohol taxes at the consumer level "is something new for us to look at."
"Until now," the Democrat said, "we've only looked at the excise tax."
David Jernigan, a Johns Hopkins School of Public Health professor who has researched the alcohol tax, wrote a memo to DeMarco on Monday outlining DC's alcohol tax structure.
For at least 20 years, Jernigan wrote, DC has charged an additional 3-4 percent "special tax" on top of its regular sales tax (now, like Maryland, set at 6 percent). Maryland levies only the 6 percent sales tax on alcohol at the consumer level.
DeMarco proposes Maryland tack on an additional 6.5 percent, which would bring the total tax a consumer directly pays on alcohol to 12.5 percent. DeMarco says this would pump an extra $215 million to state coffers each year.
Kasemeyer dismissed that level, saying lawmakers were more likely to go for a 3 percent special tax. DeMarco estimates that would bring in about $100 million more per year.
DeMarco cheered the developments, saying that talk of increasing the alcohol tax seems to have shifted from "Should we?" to "How much?"
Categories: 2011 legislative session, Tax & Spend
Comments
I am not in favor of raising taxes on any level. But I will say this would be easier to swallow (pun intended) then the so-called $.10 per drink fiasco.
Posted by: Bucktail | March 17, 2011 1:41 PM
My big question ... how did it take this long to figure this out? Hasn't someone in the Maryland suburbs next to DC ever gone into DC and bought some liquor. I would think a quick look at the receipt would have been enough. My issue still stands though ... prove that even this tax increase is needed before imposing it instead of making a tough budgetary decision that you were really elected to do.
Posted by: afmcalax | March 17, 2011 2:15 PM
A "Sin" tax is not a new idea. Journalism died in this country 30 years ago.
Posted by: Jim50 | March 17, 2011 3:09 PM
Don't fall into the trap of trying to rationalize these ever-increasing tax hikes. It's doesn't matter.. it's all smoke and mirrors. The fact is, the MD legislators are irresponsible money-whores who will seek out any potential reason to take more money out of YOUR pocket. It doesn't matter the reason... the only thing that matters to them is getting more money/power. That's the game. If you are discussing the cost/benefit of any individual tax increase, you are being played a fool.
Posted by: Michael | March 17, 2011 4:31 PM
On St. Patrick's Day they're proposing another way of increasing alcohol taxes. April 1st is still a couple days away. I take it that this isn't a joke??
Posted by: JoBeth | March 17, 2011 5:24 PM
So true Michael so true.
Posted by: john | March 17, 2011 5:44 PM
Pls. come to Delaware with your mony,
NO SALE TAX HERE
Posted by: Mike | March 17, 2011 10:36 PM
I think it's only fair to raise tax on alcohol, it is a huge burden on health services. However, I also feel that income tax should be be lowered and tax relative tax should be applied to the products / services that they refer to. i.e. Road tax for the roads. VAT for groceries, tax one alcohol, take on prescriptions. Kind of a pay as you use type service.
In general governments take far too much money in tax.
Posted by: chris | March 18, 2011 8:37 AM
Alcohol taxes should be seen in relation to the damage and harm alcoholic beverages produce in society. Alcohol taxes should be high enough to reduce general consumption. This would reduce also the tribute we pay a life long without being asked for alcohol related social costs. The profit goes to the alcohol industry.
Posted by: Kontrabass | March 18, 2011 9:39 AM
Why raise taxes on anything? Wht do these liberal Democrats feel that they have to raise taxes every year? How about they start making some cuts?
Posted by: leon | March 18, 2011 12:06 PM
Please this is just another government grab into citizen's wallets. Alcohol is very expensive already, and a sin tax increase is not going to suddenly make people drink a drop less and be healthy. It is also a regressive tax, hurting the poor much more. And nice, the $ go into the general fund to be used for all sorts of questionable spending?
If they do this the law should be revised to finally permit Marylander's to purchase and get their wine shipped across state line like Virginia and many other states...only fair. Can you say hello Deleware?
Posted by: Tony | March 18, 2011 12:31 PM
Delaware isn't that far away and while we are there we can do some shopping tax free. I hear this is great for jobs in Delaware! Also I believe Sen. Kasemeyer gets big campaign bucks from the alcohol wholesalers so no wonder this is a better idea.
Posted by: Chuck | March 18, 2011 3:50 PM
My brother Vincent argued months ago that raising taxees on alcohol would help decrease crime, end domestic violence and help the economy of Md. Is Washington, D.C. an example of achieving those goals by taxing beer? Let's be real.
Posted by: Nick DeMarco | March 19, 2011 6:52 AM
There is no good reason for tax increases. EVER! Unless we want them to mis-manage another 90 thousand in MD Tax dollars...and don't take your money to DE they can't even spell it.
Posted by: Milhouse44 | March 23, 2011 2:16 PM
the gov. and police sholud be more on the crimes in baltimore county,md and be out walking the beat getting to know the peolpe and not sitting in cars all the time plus sitting out side some of the bars stoping crime,etc.
Posted by: darrin spivey | March 26, 2011 8:15 AM