While some states are dropping prohibitions against Sunday liquor sales, making their purchase more convenient, state and local governments are also continuing their efforts to increase alcohol taxes, making the products less affordable. On October 8, the Distilled Spirits Council of the United States (DISCUS) issued this roundup of alcohol tax issues for its members.
ILLINOIS
Chicago Mayor Proposes Local Alcohol Tax Increase
Chicago Mayor Richard M. Daley (D) is asking the city council to consider a variety of tax increases to address the city’s $220 million budget shortfall, including a 10 percent increase in the city’s beverage alcohol tax rates. The alcohol tax proposal would increase the city of Chicago’s tax on distilled spirits to $1.65 a gallon from the current rate of $1.50 per gallon. The city tax on wine would go to 55 cents a gallon from the current rate of 50 cents and beer to just over 17 cents a gallon from the current 16 cents.
The Chicago city tax on alcohol is applied in addition to the state tax ($4.50 a gallon on spirits) and the Cook County tax ($2 a gallon on spirits.)
The proposed tax increases also are on top of a variety of other tax increases Daley has said he would consider, including property, telephone, hotel, sales, parking, cigarette, tire purchase, amusement, gasoline, natural gas, and soft drink taxes.
PENNSYLVANIA
Legislator Proposes Liquor Tax to Pay for Hurricane Damage
Rep. Gaynor Cawley, a Democrat from Scranton, has introduced HB 2879, which includes a new 1 percent tax on distilled spirits and a 5-cents-per-pack tax increase on cigarettes, to help pay for damage caused by Hurricanes Ivan and Jeanne.
According to Gaynor, revenues generated from the taxes will finance efforts to reinforce stream walls and buy homes and businesses in high-risk flood plains. The proposal is not supported by Gov. Ed Rendell (D), and its chances of passage appear slim. According to the governor’s office, he is reluctant to raise taxes again after recent increases in the income tax and cigarette tax.
Cawley said he envisioned a tax plan that would be installed in 2005 and phased out by 2010. Pennsylvania already has another “temporary” liquor tax–the Johnstown Flood tax, imposed to help cover the costs of damage in Johnstown following a 1936 flood. That tax was supposed to be repealed, but instead it increased over the years and is still being collected today.
TEXAS
School Funding Decision Pressures Legislature to Act
In a decision that could have major implications for the state’s tax structure, District Court Judge John Dietz ruled in mid-September that the Texas school funding system is unconstitutional. Dietz gave the legislature a deadline of October 2005 to devise an equitable school finance plan.
While the state is expected to file an appeal to the Texas Supreme Court, the issue of school funding will need to be addressed by the legislature. Beverage alcohol taxes are expected to be considered when the legislature takes up the issue again.
Gov. Rick Perry (R) and legislative leaders have pledged to work on a school finance plan when the regular session begins in January. Perry has left open the possibility of a special session this year if consensus can be reached between his office and the legislature. Legislators were unable to reach agreement on a school finance plan during a special session earlier this year.
VERMONT
State Announces Increase in Spirits Mark-up
The Vermont Department of Liquor Control increased the state’s spirits mark-up by 1.5 percent effective November 1. The department is not required to hold a public hearing or make prior notification. The mark-up was last changed in 1994 and is set at 78.6 percent for vodka and tequila. The mark-up for other spirits products depends on how much they would cost for a 9-liter case. The department told DISCUS the increase became necessary because of continuing legislative diversion of their revenue to the State General Fund.
