INDUSTRY ISSUES | State Drink Taxes

Legislators are getting creative in imposing new alcohol taxes. In Washington State, legislators required the Washington Liquor Control Board to raise the liquor excise tax by $1.15/liter, which would translate to an additional $2 per bottle for consumers. The tax will be effective in August.

The Distilled Spirits Council of the U.S. (DISCUS) called the move a “stealth tax.” DISCUS vice president David Wojnar explained: “By forcing the agency to raise prices on liquor, state legislators have craftily avoided leaving their own fingerprints on what is essentially a major tax hike. This stealth move violates the spirit of I-960 which would have required a two-thirds vote by the Legislature to enact a liquor tax increase.”

DISCUS chief economist David Ozgo calculated that increasing the Washington liquor excise tax by $1.15/liter, as proposed, will raise the state’s implied overall excise tax rate to $23.86/gallon, which is double the control state average and more than six times higher than the average rate in open states. According to the analysis, most bottle prices will increase by 5.6 percent or more, resulting in a $2 per 1.75-liter bottle increase. The analysis also showed that the reduction in economic activity would destroy 1,100 hospitality sector jobs.

State excise tax increases also are brewing in nine states, according to the American Beverage Institute (ABI), the Washington, D.C.-based on-premise industry lobbying group. Particular hot spots are Delaware and New Jersey, where governor-proposed budgets include alcohol tax increases of 50 percent and 25 percent, respectively, although Governor Jon Corzine (D) of New Jersey excluded beer to “protect the middle class.”

As federal, state and local governments seek additional funding, beverage alcohol is a prime candidate for increased taxes. DISCUS reports that under current tax levels, for every $1 that goes to the producers of spirits, wine and beer from sale of a product, $2 goes into government coffers; 59 percent of the purchase price on a bottle of spirits is government taxes and fees.

The last federal excise tax increase on alcohol in 1991 resulted in the loss of 98,000 in the distilled spirits industry, nearly $1.3 billion in lost wages, and a total $1.1 billion reduction in personal and corporate income, sales and property tax revenue to federal, state and local governments, reports DISCUS. States paid out more than $150 million in unemployment benefits, according to DISCUS calculations.


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