New Alcohol Tax Hike Proposed

BERLIN — With the so-called “Dime-a-Drink” legislation apparently languishing in both the House and Senate, a compromise bill of sort introduced this week would create a special tax that would add on single percentage point to the existing sales tax on alcoholic beverages each year for the next three years.

The proposed “Dime-a-Drink” bill, formally known as the Lorraine Sheehan Health and Community Services Act of 2011, has received no play this session, outside the court of public opinion, and appears to be dying as the session heads down the backstretch. The cross-filed bills call for a substantial increase in the excise tax on alcohol with the revenue dedicated to health care programs.

While the “dime-a-drink” tax focuses on the excise tax at the wholesale level, a bill introduced this week by Delegate Verna Jones-Rodwell (D-Baltimore City) would attack the alcohol tax increase issue from the consumer end. Senate Bill 994 would increase the sales and use tax imposed on alcoholic beverages from the current 6 percent to 7 percent for fiscal year 2012, and from 7 percent to 8 percent in 2013 before peaking at 9 percent for fiscal year 2014 and beyond.

While the “dime-a-drink” tax revenue would be dedicated to a variety of health care programs spelled out specifically in the legislation, Senate Bill 994 does not include a dedicated recipient of the estimated $90 million the hike would raise in the next three years. Instead, the bill calls for the proceeds to be deposited in the state’s general fund.

Advocates for the plan point out there appears to be room to grow in the state’s alcohol 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. According to a Department of Legislative Services (DLS) analysis of the bill, Maryland has relatively low tax rates on alcoholic beverages compared to other states.

The new alcohol tax bill introduced late last week appears to be on the fast track. It had a first hearing before the Budget and Taxation Committee on Monday just days after it was introduced and a committee vote on the legislation was supposed to come late yesterday.

According to the DLS report, one concern with the legislation as written is its possible impact on small businesses.

“The sales tax increase on alcoholic beverages may result in a decline in sales for all retailers and wholesalers,” the report reads. “Those businesses located near the state’s borders may be more adversely affected as customers in those areas could cross the border into other jurisdictions to purchase alcoholic beverages.”