The pros and cons of an alcohol tax increase

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Just like last year, an alcohol tax is being proposed as part of health legislation in this year’s legislative session.

The bill, which has not been scheduled for a hearing, is emotional for both sides — higher taxes on the one side and health care on the other can elicit some pretty strong arguments.

Today I got an e-mail that the legislation is being renamed (maybe for an extra tug on those heart strings?) to the Lorraine Sheehan Health and Community Services Act of 2010 in honor of former Del. Sheehan who died last year. Sheehan was elected to the House of Delegates in 1974, 1978 and 1982. She also served as Maryland Secretary of State from 1983 to 1987 and was inducted into the Maryland Women’s Hall of Fame in 2002.

Emotions aside, let’s look at the breakdown. Essentially the bill would raise taxes to pay for health programs.

• Distilled spirits would go from $1.50 to $10.03 per gallon,
• Wine would go from 40 cents to $2.96 per gallon
• Beer would go from 9 cents to $1.16 per gallon

Con: Opponents of the act say restaurateurs and other distributors can’t afford another tax when the recession has made survival hard for many business owners. From the Restaurant Association of Maryland:

While tax increase supporters will argue that it has been far too long since such taxes were increased, they forget that sales tax on alcohol increased by 20 percent along with all other taxable goods and services during the most recent sales tax increase in January 2008. It would be unfair to our industry to target alcohol for another increase.

Pro: Supporters say the tax would only raise the cost by about 10 cents per drink while raising roughly $214 million in new revenue. Here’s how the revenue would be divided:

• 15 percent: Development Disability Support Fund
• 15 percent: Addiction Treatment and Prevention Fund
• 15 percent: Mental Health Care Fund
• 42.25 percent: Maryland Medicaid Trust Fund to fund health care coverage for childless adults

Like so many battles it’s business owners pitted against public programs — what side do you fall on?