Maryland's alcohol tax bound to hurt budget, economy

July 11, 2011

In 2007, Maryland's legislature significantly changed the tax code to increase revenue in order to close the state's deficit. It created an even more regressive tax code increasing the sales tax and hurting the poorest among us the most. To the surprise of a majority of legislators, the deficit only got worse. This is just further proof that Adam Smith's version of economics holds more validity than any Keynesian form of economics. Tax increases do not close deficits. They only make things worse for the overall economy.

One can attempt to make arguments that taxing the rich more makes things fairer, otherwise known as progressive taxes. One can also argue that taxing the middle class and poor can control bad habits and lower costs to the state. One however, cannot argue that raising taxes lowers the deficit. It has been proven over and over again that when you raise taxes, you lower economic activity and in effect, lower local or state revenues.

On July 1, an increase on the sales tax for alcohol went into effect. The argument for this was to increase certain funds that benefit the developmentally disabled — although only 40 percent of the new revenue will actually go to helping this preferred group. The other 60 percent will go to yet another attempt to lower the state's deficit. Hasn't history already shown us that raising taxes actually reduces revenue?

Worse yet, this new tax is going to hurt struggling liquor stores and bars. Since the recession began (and it has surely not ended) bars have been struggling more than most. People no longer go out as much because they basically do not have the money. A tax like this is only going to further encourage people to stay home and protect their already dwindling funds.

Maryland needs to find new ways to increase revenue, not by taxing individuals and businesses to death but by promoting new ways of encouraging prosperity — not just for already-bloated officials in Annapolis, but for everyone, underserved, middle class or prosperous. This begins by Maryland getting out of the way of itself.

Charles Lollar,Newburg

The writer is Maryland state director of Americans for Prosperity.

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