New alcohol tax considered compromise

ANNAPOLIS, Md. -- A Senate committee has heard a bill that would phase in a special new tax on beer, wine and liquor over a three-year period.

The alcohol tax proposal is considered a compromise to the dime-a-drink proposal. Supporters said because it would be phased in, they think that it will be a less painful approach.

Until now, efforts to increase Maryland's alcohol tax to pay for health care programs have focused on raising the excise tax at the wholesale level. But advocates of the dime-a-drink campaign said they view the compromise as a victory even though the revenue generated will not directly go to specific health care programs.

"We understand that the proposal will not earmark the way we proposed it. What we are hoping is that the administration and Legislature, in the supplemental budget, use the money for these health care needs," said Vinnie Demarco, the president of the Maryland Health Care Initiative.

With the exception of Delaware, all of Maryland's surrounding states and Washington, D.C., impose a sales tax on alcoholic beverages.

The legislation increases the state alcohol tax rate from 6 percent to 7 percent for fiscal year 2012, from 7 percent to 8 percent for fiscal year 2013 and from 8 percent to 9 percent for fiscal year 2014 and beyond.

Sen. Edward Kasemeyer, the chairman of the Budget and Taxation Committee, said estimates show it would bring in $90 million after three years.
"That's going to hurt the economy because people need to go out to pump money back into the economy."
- Steve Young of Ryan's Daughter Irish Pub

The state comptroller's office tracks gallons of alcohol sold that aren't individual units and said it will cost the state $187,200 to make computer programming changes to register the new sales and use tax rates.

Retailers will also have to make programming adjustments and, according to an analysis of the bill, the tax increase may result in as much as an 8 percent decline in liquor sales and a 3 percent decline in beer and wine sales.

Steve Young of Ryan's Daughter Irish Pub has been in the hospitality industry for over two decades, and he said his business rode out the recession and the aftermath relatively well.

"The economy is bad and (people) want to drown their sorrows. (If) the economy is good, they want to celebrate because everything is so good, so they're out spending their money," Young said.

But Young is concerned about the impact of an alcohol tax proposed in State Senate Bill 994.

"When people look at it like that, it's going to scare them off," Young said. "We're not talking about a mass exodus away from the restaurant business. We're talking about a bit of a repulsion from going out. That's going to hurt the economy because people need to go out to pump money back into the economy."

Bill sponsor Sen. Verna Jones-Rodwell, D-Baltimore countered, "You have to look at it both short- and long-term. What is going to be the long-term benefit, and the fact that it is phased in. That phase-in strategy is to mitigate any drastic changes."

The last time Maryland raised the liquor tax was in 1955. The tax on beer and wine was last increased in 1972.

Senate President Mike Miller said he expects the tax to pass in his chamber. He called the proposal modest.