Should Massachusetts raise its alcohol taxes?
Dr. Timothy S. Naimi
Brookline resident; physician, Boston Medical Center; alcohol policy researcher, Boston University School of Public Health
As Massachusetts looks to “modernize” its alcohol laws, increasing our teeny tiny alcohol taxes is long overdue. Here’s why. Alcohol kills more than 1,500 Massachusetts residents each year and accounts for 10 percent of deaths among our working-age adults. According to the Centers for Disease Control and Prevention and the World Health Organization, raising alcohol taxes is among the most effective means of reducing excessive alcohol consumption and negative impacts like alcohol-related car crashes and violence. Preventing health harms and paying for alcohol-related costs is why states have alcohol taxes in the first place.
And yet Massachusetts has one of the lowest state alcohol taxes in the nation. Our excise tax on a 12 ounce beer is 1 penny, our tax on a 5 ounce glass of wine about 2 pennies, and the tax on a shot of liquor only 5 pennies. Amazingly low! And because excise taxes are based on a fixed dollar amount per volume, they erode with inflation. Presently, their value is 40 perecent less than in 1979, when they were last adjusted.
It is even worse when one compares the few cents in tax revenue per drink to the $1.90 in costs incurred for each drink sold in Massachusetts, of which 80 cents is paid by government (i.e., us taxpayers). That means taxpayers are left to pay a big chunk of the tab for drinking, and in particular are bankrolling the 15 percent of the population who drink heavily and who consume about 75 percent of the alcohol.
On top of that, we are one of only a handful of states with no sales tax on alcohol. If we just charged a 6.25 percent sales tax on a $1.50 beer, this would be about 10 cents in revenue. But instead the state gets a penny. Not charging sales tax is also unfair to non-alcohol-related businesses, who are at a competitive disadvantage being charged sales tax. Losing money on alcohol sales due to our tiny alcohol taxes is one reason why our other taxes are so high to compensate.
By raising our alcohol taxes we will reduce alcohol-related problems, raise revenue to reduce our fiscal shortfall or to offset our high income and property taxes, address economic unfairness, and improve our health and well-being.
Owns four package stores, in Mansfield, Natick, Shrewsbury, and Worcester
The beverage industry in Massachusetts has become the subject of heightened interest from a great many factions these days. So it should come as no surprise that a small group of well-intentioned people want to pile even more state taxes onto well-taxed alcohol products.
The problem is that additional taxation, on top of existing state and federal levies, will drive prices higher and push consumers to patronize lower-priced outlets in New Hampshire, or to make purchases in other neighboring states
This should be a concern to all Massachusetts residents.
As stewards of safe storage and distribution of beverage alcohol in Massachusetts, package store retailers are trusted by consumers to deliver convenience, a wide range of product choices, and safeguards against overconsumption. Anything that creates pressure for consumers to travel out of state for beverages will undercut the effectiveness of locally owned retailers while directly harming the fiscal interests of Massachusetts residents and the state government.
This is not hyperbole. Look no further than the brief 2009-2010 sales tax experiment, when the Legislature imposed an additional tax on alcohol sales, on top of the excise tax.
Almost immediately, some liquor stores saw a decline in sales due to “travel shopping.” A further drain on sales came from consumers purchasing alcohol from out-of-state entities for direct shipment to their homes. Because such purchases can avoid the state excise tax, there is less tax revenue available for state services. A year later, voters recognized the inherent unfairness of adding a new tax on top of existing tax — along with the foolishness of an incentive that exports tax and business revenue — by overturning the law via statewide referendum.
Similar results can be expected if the state raises taxes on alcohol again. Higher taxes on top of existing alcohol taxes will harm local retailers who are contending with disruptive new forces from the Internet and in the physical retail space.
The overwhelming majority of Massachusetts beverage alcohol retailers are independently owned small businesses. They deserve better than a politically expedient tax that will send consumer dollars out of state, destabilize a Massachusetts-based industry that effectively monitors the sales of regulated products, and further a regressive tax scheme.
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