'Dime a drink' tax would cost thousands of jobs

February 21, 2011|By Pietro Di Pilato

This year's General Assembly session is well under way in Annapolis, and once again we face a new threat to hospitality jobs throughout our state. Recently, legislation was introduced that would raise alcohol taxes by more than 790 percent. Supporters say it is just a "dime a drink," but a tax on alcohol is more than a tax on just one drink: It's a direct attack on the hospitality industry, and — according to an economic impact analysis of the industry developed for our company by John Dunham and Associates — it could cost more than 8,000 jobs. Waitresses, bartenders, store owners, store clerks, truck drivers and possibly even manufacturing workers at my facility in Relay — all of these jobs could be threatened by this tax.

What supporters of this massive tax increase also won't tell you is that taxes on alcoholic beverages already make up more than 50 percent of the retail price of a drink in Maryland (when one adds up the cost of all local, state and federal taxes paid by producers, distributors, retailers and consumers).

Raising this tax is simply a bad idea amid a crippling recession that has already cost roughly 24,000 jobs in Maryland's hospitality industry. This industry — which includes restaurants, bars and hotels — contributes more than $4.76 billion in economic activity to the state. A tax hike would translate to price increases for the consumer, resulting in lost sales and, ultimately to significant job losses throughout the state. This is the last thing our state needs at a time when so many Marylanders are out of work and struggling to make ends meet.

While any tax can have destructive consequences in this time of economic uncertainty, alcohol taxes violate the principles of good taxation and maximize the economic harm done per dollar raised. According to the National Conference of State Legislatures, state taxes should be broad based with rates as low as possible; take vertical and horizontal equity into account; be simple to comply with and easy to administer; be spread over as many forms of economic activity as possible; and provide appropriate and timely revenues. In its analysis of alcohol taxes, the state legislatures' group found that none of the six principles were met.

Supporters of the Maryland tax increase will also claim that increasing alcohol taxes would combat underage drinking and alcohol-related deaths, but this is simply false. Beverage alcohol excise taxes have proven again and again to be an ineffective way to control both abusive and underage drinking. Abusive drinkers do not respond to higher prices, and even advocates of high excise taxes recognize that increasing alcohol taxes is an ineffective tool in combating abusive drinking. In fact, even Philip J. Cook, a leading expert on alcohol control who advocates for higher taxes, stated in "Paying the Tab: the Costs and Benefits of Alcohol Control," that higher alcohol taxes can have limited influence on drinking behavior. Further, research shows that two-thirds of underage drinkers do not purchase their alcohol; rather they get it from of-age drinkers — friends, older relatives or their parent's liquor cabinet — so a price increase would not reduce underage drinking for that population.

Finally, not only would this legislation cost Maryland jobs, it would worsen our state's overall tax burden — which, according to the Tax Foundation, is among the highest in the country. The bottom line is that jacking up the tax burden with an ill-advised alcohol tax hike would raise prices for Maryland consumers, reduce retail sales revenue by hundreds of millions of dollars and put thousands of hospitality jobs at risk.

I urge the Maryland legislature to stand with the tens of thousands of hospitality industry employees, along with our 300-plus employees in Relay, to oppose this massive job-killing tax increase proposal.

Pietro Di Pilato is a vice president of supply for Diageo North America, a premium drinks supplier, and is the manager for the company's plant in Relay.

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