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Md. considers raising tax on alcohol

February 28, 2009|By ERIN CUNNINGHAM

ANNAPOLIS -- Some are calling the alcoholic beverage industry "recession proof," but Washington County business owners say it won't resist financial pressure for long if Maryland lawmakers vote to increase taxes on beer and liquor.

Several bills being considered by the Maryland General Assembly would raise taxes on those products as much as 400 percent.

Travis Sarno, owner of Wooden Keg Liquors in Hagerstown, said an increase in alcohol taxes would drive up the cost he pays for his inventory, and ultimately that cost would be passed on to consumers.

People buying alcohol in Maryland pay about 2 cents in state taxes per glass of wine or shot of liquor or 1 cent in taxes for a 12-ounce beer. Those taxes haven't been raised in more than 30 years.

Some of the bills would raise the alcohol tax to the equivalent of 5 cents per drink and would generate $80 million in revenue. The money would be used to support drug and alcohol treatment programs, provide services to more people with disabilities, increase state payments for people who work with the disabled and bolster the general fund.

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Sarno said Washington County residents faced with more expensive beer and liquor will travel just a few miles into West Virginia or Pennsylvania to buy the products for less.

"The stores that have suffered the most are those near neighboring states," he said. "Why would you want to increase taxes or do anything that would potentially damage a business in this environment?"

Sarno said lawmakers often propose raising alcohol taxes

James Binau, owner of Old Orchard Liquors in Halfway, said tax increases on cigarettes have reduced his sales by more than half.

"If it does the same thing to beer and wine sales, (it's) going to put us out of business," he said.

Binau has owned Old Orchard Liquors for 15 years, and also is a member of Washington County's Restaurant and Beverage Association.

Matt Lesky, who is part owner of B.P. Lesky Distributing Co. Inc. in Hagerstown, said the increased tax would make his product a little less accessible to customers.

"It taxes our local business, and the local business people, and it could impact our ability to provide health insurance for our own employees," Lesky said, referring to the bill's provision that part of the tax revenue be spent on health care.

B.P. Lesky is a wholesale beer distributor.

Lesky said there already is about a 45 percent tax rate on beer, which is taxed at the brewery and distributor level before the consumer pays sales tax.

Any increase could affect how much the company is able to give back to the community, he said.

Under the bills, the tax rate on liquor will increase from $1.50 per gallon to $6. Additional taxes would be assessed for beverages containing more than 50 percent alcohol.

The tax rate for beer would rise from 9 cents to 36 cents per gallon, and wine taxes would rise from 40 cents per gallon to $1.60.

While lawmakers hope to raise $80 million in revenue with the tax increase, Binau predicts it would be less because fewer people would buy the products.

Local opinion

"It's a sin tax," said Sen. Alex X. Mooney, R-Frederick/Washington. "I don't vote for sin taxes. I don't vote for any tax increases."

Mooney said lawmakers should support tax cuts.

"These liberals down here want to raise taxes on everything," Mooney said. "Someone has to pay for it. (The people) do not have a lot of money to give government for more wasteful programs."

Mooney said tax increases, such as the proposed alcohol tax hike, hurt low-income people the most.

Del. Richard B. Weldon Jr., who is unaffiliated and represents parts of Washington and Frederick counties, said when you raise taxes on cigarettes and alcohol, people smoke and drink less.

He said he is opposed to legislation that would rely on the so-called sin taxes to fund health care. Weldon said that is irresponsible since the revenue needed to fund those health-care programs would drop as a result of the taxes.

Sen. Donald F. Munson, R-Washington, said he always votes against tax increases, and will continue to do so.

He said the result of a 400 percent tax increase on alcohol would be to lessen the demand for it, meaning less revenue actually would come back to the state.

Munson said a tax increase would not be in his constituents' best interests.

"People are going to go back to making the stuff in the bathtub," he said.

Del. Christopher B. Shank, R-Washington, said he also is against the tax increase on alcohol.

"It's yet another sin tax that will punish people who are responsible adults who are making responsible decisions who will simply vote with their feet and cross the border and take their business elsewhere," Shank said.

Shank called the proposal a liberal attempt to raise taxes following recent tax increases at the state level.

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