Rhode Island Lawmaker Wants Higher Beer Tax

Published May 1, 2007

Rhode Island beer drinkers will see the price of their favorite brews go up if a state lawmaker who wants to double the state’s excise tax on beer gets his way.

Rep. Edwin R. Pacheco (D-Burrillville) has proposed the tax hike to fund treatment programs for alcoholics, but opposition is lining up–including from fellow Democrat lawmaker Jan Malik (D-Warren), who won’t be able to vote on the tax hike because he owns a liquor store.

Malik’s Fine Wine & Spirits in Warren sits near the border with Massachusetts, where there is no sales tax on alcoholic beverages. Rhode Island charges a 7 percent sales tax on alcohol and most other items sold at retail.

“[Pacheco] is saying he would raise the price [on a case of beer] 65 cents. Add the sales tax, and we’d be about $2.02 higher than Massachusetts,” Malik said.

“I’ll sell a bottle of Dewar’s Scotch at $29.99, and with our sales tax it comes to $32.08,” Malik noted. “They’re still selling that bottle at $29.99, with no sales tax, three miles up the road in Massachusetts. It’s the same with beer. We’re already at a disadvantage, and this tax hike would make it worse.”

Lost Sales Feared

Malik said liquor stores near the border with Massachusetts likely would lose sales. He cited declines in cigarette sales at stores near the border with neighboring states as a result of Rhode Island’s $2.34 per pack cigarette tax, highest in the region, as evidence that consumers will drive a few miles more to save money.

“A hike in the beer tax will put us at a further disadvantage,” Malik said. “We have a $110 million deficit this year and will have a $360 million deficit next year. We have to stop the way we do business here. Instead of raising taxes, we should give some breaks to attract businesses.”

Pacheco’s proposal has supporters, including the Drug and Alcohol Treatment Association of Rhode Island.

George Hacker, director of the Alcohol Policies Project at the Center for Science in the Public Interest, which advocates higher alcohol taxes and other measures to stem alcohol abuse, addressed the Drug and Alcohol Treatment Association in February and spoke in favor of raising the tax.

Benefits Predicted

“Raising alcohol taxes in order to raise prices is a powerful means of reducing underage drinking, reducing heavy and frequent drinking among young people, reducing transmission of venereal diseases, improving educational outcomes,” Hacker told Providence Journal reporter Elizabeth Gudrais for a February 9 article.

Pacheco said he is focusing on the beer tax because the resulting higher prices would discourage drinking among minors and binge drinking among college students.

Doubts Raised

“Raising beer taxes won’t reduce underage drinking and binge drinking among college students in any noticeable way,” said Sean Parnell, vice president of external affairs at The Heartland Institute. “Teens and college students aren’t as sensitive to price increases as adults, because their incomes are almost entirely discretionary. Hiking excise taxes on beer and other goods generally hits the poor the hardest. Just about everyone on the right and left understands these are regressive taxes.”

In March, acting U.S. Surgeon General Kenneth Moritsugu appealed to Americans to do more to stop underage drinking, laying out recommendations for state and local governments, school officials, parents, other adults, and young people. His recommendations did not include hiking taxes on alcohol.

Gary Sass of the Rhode Island Expenditure Council said he is skeptical of the tax hike proposal for two reasons.

“Obviously, when you earmark money for a specific purpose, as Rep. Pacheco proposes, you reduce the ability to direct money where it may be more badly needed,” Sass said. “The second reason to be skeptical is because of the economic impact. You have to be concerned about increasing the tax on a consumer product when somebody could drive five minutes and pay a lower price.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.