Pennsylvanians Oppose New Sales Tax on Beer

Published December 1, 2003

The Pennsylvania General Assembly returned to Harrisburg on November 17 to take up, among other items, a proposal to extend the state’s 6 percent sales tax to beer, wine, and liquor sold by the glass–not only in bars, taverns, and restaurants, but also in hunting lodges and by fraternal clubs and volunteer fire companies.

“It would upset a lot of people in clubs like ours,” Jack Cole, lodge secretary for a Pennsylvania Elks Club, told Pittsburgh Post-Gazette reporter Tom Barnes on November 10. “It would take away from money we give to charity, such as drug education for youths, athletic programs such as youth baseball and hockey, and essay contests where students talk about what the flag means to me.”

In October, the Pennsylvania House of Representatives passed a state income tax increase to help address the state’s $2.4 billion deficit–eighth highest in the nation, according to the American Legislative Exchange Council. The Republican-dominated state senate opposes the income tax increase and is looking to the “drink tax” as an alternative. They estimate it would raise up to $130 million a year, which would allow at least a lowering of the income tax increase.

“There are about as many tax proposals as there are legislators,” noted Lowman Henry, chairman and CEO of the Harrisburg-based Lincoln Institute of Public Opinion Research. “Taxes on cigarettes are hiked routinely, and are probably about as high as they can go. The House has passed a personal income tax increase, but the Senate is refusing to agree–so other proposals like the beer tax are likely to gain some traction in the coming weeks.”

Matthew J. Brouillette, president of The Commonwealth Foundation, a free-market public policy research and educational institute also based in Harrisburg, warned in April that a beer tax increase would hurt the state’s already-weak economy.

“While the beer tax increase may initially generate more revenue for the government from consumers,” Brouillette observed, “the tax will eventually come down hardest on independent breweries, small ‘mom and pop’ beer distributors, taverns, restaurants, and their respective employees as consumers seek alternative sources outside Pennsylvania.”

“[B]usinesses across Pennsylvania should ask themselves one simple question,” Brouillette wrote: ‘When will our products or services be targeted?’ Given state government’s insatiable appetite for more tax dollars, a junk food excise tax on the likes of Herr’s potato chips, Hershey’s chocolate, or Philadelphia-produced TastyKakes is probably not far behind.”

Eric Montarti, a policy analyst for the Pittsburgh-based Allegheny Institute for Public Policy, told Budget & Tax News his organization opposes the beer tax increase “because it would fund the expansion of government.”

He noted, however, that a reasonable policy compromise would be for state lawmakers to open wine and beer sales to competition. “The retail sale of beer and wine is still tightly controlled here,” Montarti noted. “You can’t buy a bottle of wine or a six-pack of beer in a convenience store or in a grocery store.”

Although the state has launched a few small experiments with making retail sales more convenient–by opening state-run liquor stores within grocery stores, for example–Montarti said that’s not enough.

“We don’t think a drink tax increase is called for,” Montarti said. “But if lawmakers are going to do that anyway, they ought to give us deregulation in return. They should open wine and beer sales to competition.”

Diane Carol Bast is vice president of The Heartland Institute. Her email address is [email protected].