North Carolina Seeks to Hike the State’s Beer, Tobacco Taxes

Published July 1, 2008

North Carolina Gov. Mike Easley (D) managed to offend both the mentally ill and beer drinkers when he unveiled his budget for Fiscal Year 2009.

His proposed budget includes new taxes on beer, wine, and spirits to pay for mental health reform, and higher taxes on cigarettes to pay for teacher raises, as well as a $1 billion increase in general fund spending on operations.

“My thought is, if four cents a can, if that causes somebody economic hardship, then they’re probably drinking too much and going to be customers of mental health, substance abuse sooner or later anyway,” Easley said in defending his beer tax proposal.

Lawmakers Surprised

Legislative leaders in both of North Carolina’s legislative chambers and across party lines were surprised by the tax hike plan, which Senate Republican leader Phil Berger (R-Rockingham) called “one last tax hike to ensure [Easley’s] legacy.”

Democratic leaders questioned the wisdom of imposing new taxes in a sluggish economy.

“We didn’t anticipate any new taxes this year,” said House Speaker Joe Hackney (D-Orange). “This is a year for tightening our belts. This is a year for looking for efficiencies. This is what our constituents are doing.”

Taxpayer groups also condemned the tax increase.

“The bottom line is that politicians are hoping to leverage perceived bad habits to fund their own bad habit–growing government beyond our ability to pay for it,” said Dallas Woodhouse, state director of Americans for Prosperity, a national grassroots organization that advocates fiscal responsibility in government.

80% Tax Hike Proposed

Easley’s proposal, offered this spring, would increase North Carolina’s beer tax, already fourth highest in the nation, by 80 percent, to nine cents per can. Taxes would climb 19 percent for most wines and 16 percent for fortified wines such as port. Taxes on hard liquor, which is sold only through state-run stores, would increase 32 percent.

The 57 percent increase in the cigarette tax, to 55 cents a pack, would leave North Carolina with the nation’s twelfth-lowest tax. The state currently has the seventh-lowest cigarette tax, at 35 cents a pack.

“During a period of time when North Carolina consumers are struggling with record high gas prices and home foreclosures and a weak economy, … [Gov. Easley] would increase an already-high state excise tax which falls most heavily on those least able to afford it,” said Dean Plunkett, executive director of the North Carolina Beer and Wine Wholesalers Association.

Joseph Coletti ([email protected]) is fiscal and health care policy analyst at the John Locke Foundation in Raleigh, North Carolina.