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Alcohol: Always at Risk for Taxation

August 5, 2009 By: Distilled Spirits Council of the United States


After another week of high emotions and intense negotiations, Congress was unable to meet the President’s deadline and pass health care reform legislation before August, as the proposals have been bogged down at the committee level. Two of the three House committees with jurisdiction over health care (Ways & Means and Education & Labor) have completed work. The House Energy & Commerce Committee has struggled to address concerns expressed by a block of fiscally conservative Democrats in the Blue Dog Coalition, but it now appears they are on track to produce a bill as they head home for a five-week district work period. Speaker Nancy Pelosi (D-Calif.) and House Majority Whip Steny Hoyer (D-Md.) had to delay plans to schedule a vote on the House floor last week and have stated they intend to produce a bill when they return from recess after Labor Day.

Work in the Senate is moving at a much slower pace. The Senate Committee on Health, Education, Labor and Pensions produced a bill that contains components of a government-run plan in mid-July, but the key aspects of financing the legislation fall in the lap of the Finance Committee. As pressure escalated to produce a bill from both the President and Senate Majority Leader Harry Reid (D-Nev.), Finance Committee Chairman Max Baucus (D-Mont.) worked to overcome partisan bickering. Republican committee members Chuck Grassley (Iowa) and Mike Enzi (Wy.) questioned his intentions about producing a bipartisan product while rank and file Democrats charged that Republicans were only interested in torpedoing the effort and sinking the bill. By the end of the week, Chairman Baucus was able to appease his working group and reiterated his intentions of crafting a bill with bipartisan support. His Senate working group will continue to deliberate this week before they head to recess on August 7. It’s doubtful we’ll see any plan released in the Senate until mid-September.  

At this point, numerous sources who are part of these negotiations claim that an increase in alcohol taxes is not part of any discussion.  But realistically, everything is still on the table. If you have an opportunity to meet with your U.S. Senator or Representative during August, make a point of underscoring these key points:

  1. Simply put, an alcohol tax is nothing more than a hospitality tax!  The hospitality and leisure sector cannot withstand additional taxes.  Since May 2008, unemployment now stands at 11 percent and more than 525,000 jobs have been lost.
  2. The nation’s hospitality industry derives a substantial portion of its jobs and sales from beverage alcohol. Restaurants that sell spirits, beer and wine earn on average more than 25 percent of their income from alcohol sales.
  3. Beverage alcohol is among the highest-taxed consumer product in the U.S.  Direct taxes on beverage alcohol account for more than one-third of the shelf price of distilled spirits, beer and wine. Government at all levels collects twice as much in taxes than those who produce, distribute and sell combined make in profits.
  4. Hospitality taxes penalize responsible middle-income consumers. The federal excise tax on beverage alcohol is one of the most regressive taxes imposed on any American product. Half of beverage alcohol is consumed in households with less than $50,000 in annual income.         

For additional materials and talking points, go to www.StopHospitalityTaxes.com.

State Update:

Connecticut: Republican Gov. Jody Rell announced a new budget proposal that includes raising $391 million in new revenues over two years by increasing taxes on beverage alcohol, corporations and tobacco. The proposal would increase the state excise tax on spirits, beer and wine by 10 percent. The tax hike on alcohol is a bad deal for recession-weary consumers and the hard hit hospitality industry in Connecticut. By any measure, beverage alcohol is already over taxed. On the typical bottle of distilled spirits, approximately 56 percent of the purchase price in Connecticut already goes to a tax of some kind. The proposed tax increases would force retailers to raise prices and result in a projected loss in sales revenues of $13.5 million and a loss of jobs — many in the already-struggling hospitality industry. Please reach out to your state legislators via www.StopHospitalityTaxes.com and urge them to support the hospitality industry and its employees by opposing the increase in beverage alcohol excise taxes. —DISCUS


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