Maryland drink stays cheap

Lawmakers, others point to coordinated lobbying efforts that keep alcohol levies low

December 30, 2007|By Bradley Olson | Bradley Olson,Sun reporter

If all the tax increases the General Assembly passed last month have you down, there might be at least one bright side: Drowning your sorrows is still cheaper in Maryland than just about anywhere else.

Cigarette taxes, sales taxes, car titling taxes, income taxes and plenty more came under scrutiny as the legislature and Gov. Martin O'Malley sought to fix a $1.7 billion budget shortfall and add new spending for roads, health care and the environment. But Maryland's taxes on alcohol - which haven't increased since 1955 for liquor and 1972 for beer and wine - completely escaped the attention of the state's leaders last month, leaving the rates among the lowest in the nation and far less than the effective levies in neighboring states.

Efforts to raise the taxes in recent years have gained little traction, lawmakers and advocates say, largely because of a powerful and coordinated lobbying effort that has allowed the industry significant sway in how it is regulated.

Although the issue of raising alcohol taxes has garnered scant attention in the General Assembly in recent years, organizations with an interest in the sale or distribution of alcoholic beverages have paid Annapolis lobbyists at least $855,000 since 2005, according to State Ethics Commission data analyzed by The Sun.

Since 1999, those same interests have given $542,000 in campaign contributions to lawmakers and political action committees, according to a Sun review of data from the State Board of Elections. Almost a quarter of the liquor industry's campaign contributions are concentrated among the Assembly's top-ranking lawmakers. Former Gov. Robert L. Ehrlich Jr. took in almost $50,000 during the 2002 and 2006 campaign cycles, and O'Malley's campaign received $9,000 during the latter cycle, according to records.

"We have seen, over and over and over again, whether it's Capitol Hill or state capitals across the country, that special interests like the alcoholic beverage industry have had undue influence over the political decision-making process," said Del. William A. Bronrott, a Montgomery County Democrat who has sponsored legislation to increase the alcohol taxes four times in the past six years, all of which failed. "They have been successful in confusing the issue to the detriment of the greater good."

Steve Wise, a lobbyist and legal counsel for the Maryland State Licensed Beverage Association, said that the current tax level is appropriate because of the state's sales tax, which amounts to a double tax on alcoholic beverages. And efforts such as Bronrott's - which proposed to use revenues from the tax to step up alcohol and substance abuse treatment - are unfair to the industry, he said, since it already spends so much money on similar efforts.

"There are an awful lot of programs that are funded by alcohol suppliers, wholesalers or retailers aimed at the public costs of alcohol," Wise said.

In Maryland and D.C., the tax on spirits is $1.50 a gallon, the lowest rate in the country. West Virginia charges $1.70 and Delaware, $3.75. Pennsylvania and Virginia sell liquor directly through state-run stores, but the Distilled Spirits Council of the United States estimates they have effective tax rates of $6.54 a gallon in Pennsylvania and $14.54 a gallon in Virginia. Maryland's taxes on beer and wine are 10th- and 13th-lowest in the nation, respectively.

Alcohol taxes may have escaped notice in last month's special session because they make up a relatively small part of the state's revenue - about $30 million out of a $15 billion general fund. Similarly, federal taxes on alcohol have also not been increased for more than a decade.

"Shockingly enough, it does not raise a great deal of money," said W. Minor Carter, a lobbyist for the Beer Wholesalers' Council of Maryland. "Alcoholic beverages are susceptible to tax increases. The last time taxes were increased by the feds, consumption went down markedly, so the tax increase was, to a large extent, counterproductive. As a revenue raiser, it's not a particularly successful avenue."

O'Malley did not include higher alcoholic beverage tax levies in his proposed package of tax increases. Administration officials said the compressed time frame of the session prompted a focus on measures that had already passed at least one chamber of the legislature in a prior year, or had been the subject of committee hearings.

"The governor's proposal represented our best judgment of where consensus lied to pass a fair, long-term solution to the inherited $1.7 billion budget deficit - while protecting middle-class families and education," said O'Malley spokesman Stephen Kearney.

But Sen. Richard S. Madaleno Jr., a Montgomery County Democrat, said the special session was as good an opportunity as any in recent years to visit the low rate.

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