The combined threat of state and federal alcohol tax increases has become a “perfect storm” fast descending upon America’s hospitality industry from Washington State to Washington, D.C., leaving hundreds of thousands of jobs lost in its wake.
At the state level, alcohol tax threats have emerged in 40 states. Though many of these threats have been defeated initially, they often have reappeared multiple times, sometimes in special session. Seven states already have seen alcohol taxes increased in 2009: Maine, Massachusetts, New Jersey, Oregon, Vermont, Washington State and Kentucky — the very home of America’s native spirit.
As state governments try to reduce overwhelming budget deficits, legislators are looking at every possible way to cut spending and raise taxes. Unfortunately, despite severe economic conditions affecting the hospitality industry, alcohol taxes are under constant threat as both federal and state legislators consider ways to fund spending programs throughout the rest of 2009 and into 2010.
For those of us interested in protecting hospitality jobs in our state and across the country, the time to unite and act is now.
Because the hospitality industry is the second largest U.S. employer, the burden of higher taxes at the state or federal level will crush hospitality employment at a time when our country can hardly afford it. It’s time to say, “Stop hospitality taxes!”
Owners and employees of restaurants, bars, clubs and package stores should contact state and federal representatives to demand that they reject further government-imposed costs on hospitality businesses. It is critical for a united hospitality industry to face these job-killing tax threats head-on. Alcohol taxes are particularly insidious because they hurt both average-income consumers and our small businesses in the same place: the pocket book.
Here are key reasons to rally against higher alcohol taxes:
First, alcohol is already one of the highest taxed products in America. Direct taxes on alcohol imposed by federal, state and local governments account for more than one-third the shelf price of spirits, wine and beer. These are primarily excise and sales taxes. In fact, the total tax for a typical bottle of spirits is 59 percent of the price paid by the consumer.
Second, increasing taxes on the hospitality industry is counterproductive. When federal excise taxes on spirits, beer and wine were last raised in 1991, they generated $2.4 billion less than Congress expected over the following five-year period. The tax rate on spirits exceeded the point of “diminishing returns” after the 1991 increase. Spirits sales and revenues actually fell, and it took 10 years before they regained their pre-1991 levels. There is no reason to believe 2009 would be any different.
Third, America’s hospitality industry derives a substantial portion of its jobs and sales from alcohol. Restaurants that sell alcohol earn, on average, more than 25 percent of their income from alcohol sales. Manufacturers, distributors and retailers directly and indirectly employ more than 3.7 million Americans. Hundreds of thousands of these jobs are in danger from the dual threat of state and federal tax increases.
Now is the crucial time to challenge state and federal politicians who believe raising alcohol taxes is “low-hanging fruit.” We must unite in a broad coalition, under the banner of hospitality, to thwart these dangerous tax policies and protect our workers.
For more information on how to help fight excessive alcohol taxes, visit