Alcohol tax meets some criticism

Posted: Tuesday, May 28, 2002

ANCHORAGE (AP) -- While a major tax package faltered in the recent legislative session, Alaska lawmakers did approve what amounts to a dime-a-drink alcohol tax that's expected to bring in $20 million a year.

If Gov. Tony Knowles signs the legislation as expected, Alaska will have the highest alcohol excise tax in the nation. Supporters say it's needed because of the heavy cost of alcohol-related diseases, crime and abuse in a state with one of the highest drinking rates in the nation.

Alcohol buyers were generally critical.

''''If the government ran itself more like a business, we wouldn't have these (budget) problems,'' said Jason Borland, holding a six-pack of Coors outside a liquor store in East Anchorage.

''It ain't enough to do nothing,'' said Ben Kusche. ''We've got money in the Permanent Fund. Let's spend some of that.''

But Prentiss Williams, who was picking up a few shooters before a ball game, said the increase didn't bother him.

''It's not going to affect me because I don't drink that much anyway,'' Williams said.

The tax increase works like this: Distributors and wholesalers who sell or import liquor will pay. On a gallon of whiskey, they'll pay $12.80 in excise tax compared to the $5.60 they're charged now. The tax on a gallon of wine will jump to $2.50 from 85 cents. For beer, the tax will rise to $1.07 a gallon from 35 cents.

Lawmakers converted the tax into the dime-a-drink formula. Whether drinkers actually end up paying more depends on the retailers.

Most bar owners, especially those with thin profit margins, will pass the tax on, said John Pattee, owner of Gaslight Lounge and Avenue Bar in downtown Anchorage. He's hoping to eat the increase, about $20,000, to stay competitive.

Pattee and others in the liquor industry were angry that lawmakers approved what in some cases amounts to a 200 percent tax hike.

''It's unfair and it's an outrageous amount,'' Pattee said.

Lowell Shinn, owner of 13 Brown Jug liquor stores in Anchorage and Eagle River, said a case of Budweiser that sells for $14.49 now would cost more than $16 with the tax. It's hard to tell yet if the tax will drive customers away, Shinn said.

Some tax supporters think bars might actually make money.

''I'm willing to venture that the local bar that's selling the beer for $2.25 is going to pass on the cost and bump it up even more,'' to say $2.50 or $2.75, said Rep. Lisa Murkowski, R-Anchorage, chief sponsor of the alcohol tax hike.

Research from other states that have raised alcohol taxes shows higher tariffs mean lower consumption, according to the state Department of Revenue, although there's no agreement on the exact relationship between price and buying behavior. The state cites studies by the Center for Science in the Public Interest as indicating that a 10 percent rise in beer prices causes a 3 to 4 percent drop in sales.

The industry was willing to pay some higher taxes, but feels the dime-a-drink formula is too high, said Tom Anderson, executive director of the Anchorage Cabaret, Hotel, Restaurant & Retailers Association. He doubts the tax will hurt liquor store sales or bar patronage much, but said the industry feels the Legislature made it the bull's eye on a target.

Murkowski said raising Alaska's alcohol tax was the responsible thing to do given the state's budget problems and because Alaska spends $250 million to $450 million annually on costs associated with alcohol dependency and abuse.

State figures show Alaska has the highest alcohol-related death rate of any state, and the highest percentage of children born with fetal alcohol syndrome.

Alcohol is a factor in 83 percent of Alaska child abuse investigations, 63 percent of sexual assaults and 60 percent of domestic violence reports.

Alaska's arrest rate for driving under the influence and alcohol-related vehicle fatalities ranks among the highest in the nation.

Critics say there's no guarantee that the new tax money will address alcohol-related problems.

That's true, said Murkowski, but if the state is forced to pay for the messes caused by problem drinkers, those who indulge should contribute more.

''If you don't drink you will never ever be impacted by this. If you drink moderately you will be taxed moderately. It's akin to a user-fee,'' Murkowski said.

After the Legislature sends Knowles the bill, the governor has 20 days to sign it. The tax takes effect 90 days later, likely around September.

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