Policy Documents

Research & Commentary: Maryland’s ‘Dime a Drink’ Tax

February 17, 2011

Maryland is once again considering a “dime a drink” increase in the state’s alcohol taxes. Proponents say it will bring in $215 million toward reducing the state’s budget deficit.

Maryland already has hiked taxes on tobacco products, businesses, and high-income earners, yet the state continues to struggle to balance its books. Since passing more than $1.4 billion in targeted tax hikes in 2007, Maryland is home to one-third fewer millionaires, still faces recurring budget deficits, and has endured a significant increase in cigarette smuggling, all while the state’s budget has grown more than 11 percent.

This is further proof the state is suffering from a spending problem, not a revenue “shortfall,” and it’s why increasing the excise tax on alcohol products will fail to solve Maryland’s nagging budget problems. The tax hike would excuse even more government spending at the expense of real reforms and disproportionately burden low- to middle-income Marylanders.

Maryland has a relatively low alcohol tax, and the state should avoid forfeiting this competitive advantage. Instead, state policymakers should work on making the entire tax code competitive, to help foster economic growth. Increasing alcohol taxes might give the state a short-term revenue boost, but spending cuts and lower tax rates on a wider base provide the best and only sustainable way to balance the budget.

The documents linked below offer additional information about alcohol and other “sin” taxes.

 

Ten Principles of State Fiscal Policy
http://www.budgetandtax-news.org/article/19354
This booklet provides policymakers and civic and business leaders with a highly condensed, easy-to-read guide to state fiscal policy matters. It presents the 10 most important principles of sound fiscal policy, from “Above all else: Keep taxes low” to “Protect state employees from politics.”

Wisconsin Prosecutors Misguided on Alcohol Taxes
http://www.taxfoundation.org/blog/show/24035.html
Mark Robyn of the Tax Foundation points out raising taxes on alcohol does not deter traditional “problem drinkers” and thus does not decrease the external costs associated with alcohol consumption as much as would be done by targeted enforcement of laws problem drinkers break.

Alcohol Use: If You Drink, Keep it Moderate
http://www.mayoclinic.com/health/alcohol/SC00024
The Mayo Clinic advises that moderate drinking may have health benefits and warns of the dangers of heavy drinking.

The Sin Tax: Economic and Moral Considerations
http://www.acton.org/publications/occasionalpapers/publicat_occasionalpapers_sintax.php
Fr. Robert Sirico, president of the Acton Institute, argues the economic and moral considerations of “sin taxes” are not mutually exclusive: “We ought to consider fundamental issues regarding the interplay between private morality and public policy.”

Research & Commentary: The Best And Worst Ways to Eliminate a Budget Deficit
http://www.budgetandtax-news.org/article/24760
This Research & Commentary by Heartland Institute Budget and Tax Legislative Specialist John Nothdurft identifies some of the best and worst ways states use to trim their budget deficits.

‘Sin’ Taxes Hurt Sinners and Saints Alike
http://www.ntu.org/main/press_commentaries.php?PressID=1102&org_name=NTU
This commentary by the National Taxpayers Union explains how the burden of “sin” taxes is not placed only on users of those products and services, but instead is shared by all taxpayers.

 

For further information on this and other topics, visit the Budget & Tax News Web site at http://www.budgetandtax-news.org, The Heartland Institute’s Web site at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at http://www.policybot.org.

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, contact The Heartland Institute’s director of government relations, John Nothdurft, at 312/377-4000 or jnothdurft@heartland.org.