Tax cut on retail liquor sales making its way through Michigan Legislature

A bill that would cut taxes on liquor sales at retail establishments is quietly making its way through the Michigan Legislature.

The bill, which would carve a $14 million hole in the state budget, would eliminate a 1.85 percent tax on sales of distilled spirits at off-site premises — meaning grocery stores and party stores, for example.

The state Senate passed the legislation unanimously June 1, and it’s now under consideration by the House. The bill would preserve a 12 percent tax surcharge already added onto liquor sales.

Supporters describe the bill as a way to boost Michigan retailers and eliminate an extra tax on liquor sales that does not apply to sales at restaurants.

But the legislation, which would take effect Oct. 30, has drawn the ire of a policy group that fights laws that expand the availability of alcohol.

Mike Tobias, executive director of Michigan Alcohol Policy, an all-volunteer group, said the legislation “makes no sense” in light of the state’s budget problems and the societal implications of lowering alcohol taxes.

“Price is a factor in consumption and alcohol related problems,” Tobias said. “In general, the higher the price, the lower the problems. Conversely, the lower the price, the higher the problems.”

An analysis by state fiscal analyst Josh Sefton showed that eliminating the extra 1.85 percent tax on retail liquor sales would lead to a $14 million drop in tax revenue for the Liquor Purchase Revolving Fund, dollars that are “regularly transferred to the General Fund,” Sefton wrote.

The bill does not specify how the lost revenue would be made up. The Legislature in May approved a balanced state budget for 2011-12, eliminating a structural deficit, raising taxes on many seniors, cutting business taxes and slashing funds to public schools, higher education and municipalities.

Ari Adler, a spokesman for Speaker of the House Jase Bolger, R-Marshall, said in an email that the speaker “supports the bill in concept,” although “there are still questions about the budget impact.”

“It would help eliminate an additional tax on alcohol not imposed by other states, which means businesses in our border counties in particular would benefit,” he said.

The bill has been referred to the House Committee on Regulatory Reform, which is “reviewing all aspects of the bill and the fiscal impact,” Adler said.

State Rep. Hugh Crawford, R-Novi, chairman of the committee, did not respond to a request for comment.

It’s not clear whether the state’s major retailers are backing the bill.

Tom Scott, a spokesman for the Lansing-based Michigan Retailers Association, said his group hasn’t “been involved in this legislation.”

A spokesman for Michigan-based grocery store chain Meijer did not respond to requests for comment.

Tony Karim, owner of Ann Arbor Party Center on Jackson Avenue, said the proposal would help his business, in part because price is the main factor that his customers consider.

Do lower prices translate directly into more sales?

“Yes, 100 percent,” Karim said.

Tobias said his group's research shows that in 2010, 23 states introduced bills to raise alcohol taxes, though none were approved. So far in 2011, only Maryland has successfully raised taxes on alcohol, he said.

He said Michigan Alcohol Policy wants to raise the excise tax on beer, which currently amounts to about $6.30 per 31-gallon barrel, or 1.9 cents for a 12-ounce serving.

For now, his group is asking its supporters to contact members of the House Committee on Regulatory Reform to lobby against the bill.

“I think the vast majority of citizens support” the current tax structure, he said. “If they really thought about this issue, I think they’d say alcohol is pretty cheap, it’s pretty accessible."