BERLIN – Although no formal legislation has been introduced in the early days of the 2010 General Assembly session, a handful of state lawmakers, with the blessing of several advocacy groups, are pushing for a “dime a drink” alcohol tax increase in Maryland, a proposal that appears to be gaining little traction in this hospitality-rich area.
With the support of a coalition of advocacy groups, along with a report on the effects of a tax increase on public health in Maryland, a handful of state legislators are proposing a substantial hike in the alcohol excise tax during the current General Assemble session. On the surface, the increase is expected to reduce consumption, thereby reducing alcohol dependence, drinking and driving and a wealth of other alcohol-related health issues, but the underlying reason is purely financial.
With the state facing an expected $2 billion deficit heading into the General Assembly session this week, state lawmakers are exploring any and all means to increase revenue, and adding a dime a drink tax on alcohol purchases is expected to raise roughly $200 million for state coffers. According to the bill’s potential sponsors, the money raised would pay for programs to prevent and treat substance abuse and fill funding gaps for health-related services connected to alcohol consumption.
Advocates for the plan point out there appears to be room to grow in the state’s alcohol excise tax structure. The tax on distilled spirits in Maryland has not been increased since 1955, while the tax rate on beer and wine was last raised in 1972. It’s important to note other tax increases over the years, such as sales tax and other licensing and permit fees have steadily increased over the years, raising the cost of a drink in kind, but consumers in Maryland currently pay about a penny in taxes per drink and increasing the tax to a dime a drink represents as increase of 1,000 percent.
Despite facing an enormous deficit, many state lawmakers have said any tax increases will likely be off the table going into the current General Assembly session, largely because most residents are already struggling in the current economy, and, no less important, it is an election year. While no bill has been formally introduced and he hasn’t seen the specific language in the proposal, Delegate James Mathias (D-38B) said this week he is not inclined to support the substantial increase in the alcohol excise tax.
“I’m certainly going to listen to the arguments, but this is not something I could support,” he said. “I just can’t see myself supporting this. We increased the sales tax, the pass-through taxes and everything else and it ends up being paid by the customer.”
Mathias said the proposed dime a drink increase would ultimately be borne by the small businesses on the front lines of the hospitality industry. Ultimately, the increase would be passed on to the consumer, which is reason enough to resist the change, but the impact on small businesses could be substantial.
“They’ve been under siege with everything,” said Mathias. “It just further handicaps small businesses that are already under siege in this economy. They’re facing property tax increases, license fee increases, withholding increases and just about everything else. To add another increase on top of all that, I think they would have an extremely difficult time with that.”
Mathias was quick to point out he was not predisposed to voting against any alcohol excise tax increase and said he will give the arguments in favor of an increase his full attention, but it appears he will not be swayed from his opposition.
“I try not to completely shut the door on anything and I won’t slam the door in anybody’s face, but I’m having a difficult time getting behind this,” he said. “I’ll listen, but I can’t imagine anyone changing my mind on this.”
Meanwhile, those on the front lines of the alcohol industry are far less guarded in their opposition. The Worcester County Licensed Beverage Association (WCLBA) is unified in its position on the proposed increase, according to Buxy’s Salty Dog Saloon owner Doug Buxbaum, an association director.
“We’re obviously adamantly opposed to it,” he said. “This proposal could be seriously detrimental to the small business guys. We’re fighting to bring people to Ocean City, but what we hear all the time is how expensive everything has gotten.”
Buxbaum said liquor license holders in Worcester pay county and state taxes on liquor because of the somewhat unique relationship with its Liquor Control Board (LCB). Worcester is one of a few jurisdictions in the state to have an LCB, which essentially adds another middleman in the distribution process.
“For us, it really represents double taxation,” he said. “We get clipped on the county side and the state side. It’s a cost some small businesses might not be able to absorb and this could be make or break for some of our members.”
A study released last month by the Johns Hopkins Bloomberg School of Public Health suggests an increase in the state’s alcohol excise tax could have both fiscal and health benefits.
“These tax increases are a win-win for the state,” the study concludes. “They prevent and reduce drinking and death among young people as well as among heavy drinkers, and they bring in additional revenues which can be used to create and preserve jobs and services.”