Ohio House OKs doubling tax, but Senate's opposed
By M.R. Kropko The Associated Press
CLEVELAND - Running a restaurant in this city is hard enough, Doug Petkovic says.
The owner of Theory in the trendy Tremont neighborhood said businesswould be tougher if he's forced to charge customers more for beer and wine, which would happen if Gov. Bob Taft's proposed tax hike goes through.
"Any type of price increase makes it more difficult for people to come here and dine," said Petkovic, 40. "In my eyes, that sort of taxation amounts to almost persecution."
Many everyday drinkers, distributors and the beer and wine industries will raise a glass to that opposition. Advocates for fighting alcohol abuse are among those cheering.
It's a debate happening more often these days in states that are turning to higher alcohol taxes to raise money after years of stable rates and focus on tobacco taxes.
This year, Kentucky and Washington state increased liquor taxes. Legislatures in Montana, Indiana and North Dakota failed to do the same with beer. Lawmakers in Texas are considering an alcohol tax increases to help pay for schools.
In Ohio, Taft wants to double the excise tax of 18 cents a gallon on alcoholic beverages other than liquor: beer, wine, vermouth, champagne, mixed beverages and cider. It would be the first increase since 1993. The tax has commonly become known as the beer tax because beer makes up nearly 85 percent of the state's alcoholic beverage tax revenue.
While the House approved the tax, the Senate plans to remove it. Both sides must reach an agreement next month.
The impact on Ohioans would vary depending on how each manufacturer and retailer passes along the tax. An example: it could amount to about 2 cents more on a $2.50 12-ounce bottle of Budweiser at Brews Cafe in Granville.
Those pennies would add up to an additional $50 million for the state's general fund as lawmakers try to balance a budget in the era of rising Medicaid, education and other costs. Ohio received $58.8 million in tax revenue from alcoholic beverages in the 2004 fiscal year.
Kentucky's General Assembly in March approved increasing the wholesale liquor tax from 9 percent to 11 percent, which is expected to raise $8.8 million this fiscal year.
George Hacker, director of the group's Alcohol Policies Project, which has studied such taxes for 23 years, said states and the federal government collected $18 billion in annual alcohol taxes from the $140 billion and growing industry.
"What's happening now is that states have run out of other revenue sources," Hacker said. "The recognition of this valuable revenue source as well as the fact that these taxes overall have been raised rather infrequently over the past
30-40 years are beginning to get through."Ohio's proposed increase is part of a broader plan to eliminate taxes on business equipment and inventory and lower business income taxes, among other things.
Paul Jenkins, president of Columbus Distributing Co., the distributor of Anheuser-Busch and allied brands, said an increase could mean job cuts at his company if demand for the beers drop.
He said he doesn't intend to absorb the cost.
Sellers are worried, too, especially those near Ohio's borders. With the increase, Ohio's beer tax would be well above that in neighboring states.
Vicki Smith, a manager at Hofbrauhaus Newport LLC, said Ohioans already cross the border to buy cheaper cigarettes and thinks they'll do the same for beer and wine. "I'm sure it will send people our way," she said.
Mike Hays, owner of Hyde Park Wine and Spirits on Madison Road, expects he'll lose some business to Kentucky.
"The governor is trying to push people across the border," he said. "He's down on alcohol and tobacco."
-------------------------------------------------------------------------------- MILLIONS AT STAKE THE IDEA: Bring in millions more for states by increasing taxes on alcohol, after years of stable rates and more attention on tobacco taxes.
NOT A SURE SHOT: Legislatures in Montana, Indiana and North Dakota failed to increase beer taxes.
QUOTE: "The governor is trying to push people across the border," said Mike Hays, owner of Hyde Park Wine and Spirits on Madison Road.
The Associated Press