Proposed tax hike leaves bad taste for alcohol industry

By Jenny Neyman

Redoubt Reporter

Gov. Walker’s proposal to double excise tax rates on alcoholic beverages in Alaska will be up for another round of public testimony in front of the House Labor and Commerce Committee on Monday.

The committee heard testimony on HB 248 Saturday, as well, mostly in opposition to the increase.

Bill Howell, of Sterling, who teaches a beer appreciation class at Kenai Peninsula College and writes books on the history of brewing in Alaska, noted that Alaska already has the highest excise taxes on wine, and second highest on spirits and beer in the country, generating nearly $40 million per year.

Alaska’s current rate is $2.50 per gallon tax on wine, compared to the national average of $0.83. For spirits, it’s $12.80 per gallon, compared to $4.45. For beer, it’s $1.07 per gallon, compared to $0.28. Though, to be fair, many other states have a statewide sales tax, whereas Alaska does not.

“The producers, distributors and retailers of beer, wine and spirits have no choice but to pass this tax, just like any other tax, right along to the end consumers,” Howell said. “They may still go out of business, but they’ll have to pass it along to us. That’s who Gov. Walker is directly targeting with this tax — me and every other Alaskan who might like a glass of wine with their meal or a nice beer after a hard day’s work.”

Don Grasse, of Anchorage and president of K&M distributors, noted that none of the governor’s other proposed taxes involve such an extreme hike.

“The fishing tax was proposed to go up 1 percent,” Grasse said. “The mining tax was proposed to go up 2 percent. Cigarette taxes will move us to No. 8 in the nation. It appears to us that the alcohol tax is out of step with all other proposals that the governor and his staff have promoted.”

Gary Superman, who owns the Hunger Hut bar and liquor store in Nikiski, said the industry took a hit when tax rates were doubled in 2002.

“We will be stuck in the stratosphere as far as taxation on alcohol is concerned in this state. And that will no doubt have a stifling effect,” Superman said. “… I don’t think that the industry could really absorb this outrageous increase that’s being proposed and remain viable.”

Bill Fry, of Bear Creek Winery, in Homer, said that the tax hike would be especially difficult for made-in-Alaska products that compete with less-costly options from out of state.

“We just can’t raise our prices to cover this increase,” Fry said. “Making quality wine from Alaskan local ingredients is expensive. Our price point is as high as it can go. We’re competing with $10 and $12 bottles of wine from Outside.”

Not everyone spoke against the bill. Michael Jeffrey is a retired superior court judge in Barrow. He said he saw the crime rate spike when Barrow went from being a dry to wet community.

“Research, evidence-based, (shows that) one response that is effective is just this — to increase state excise taxes on alcohol, because it not only generates revenue but it targets something that unfortunately has cost a lot of heartache all over the state,” Jeffrey said.

Tiffany Hall, executive director of Recovery Alaska, said that alcohol-related deaths in Alaska dropped 29 percent after the alcohol excise tax was raised in 1983, and another 11 percent when it was raised in 2002.

“There is substantial evidence indicating that increases in alcohol tax reduces alcohol consumption,” Hall said. “The cost of alcohol abuse to Alaskans in lost productivity, health care costs, traffic crashes, criminal justice, protective services — all of this totals over $1.2 billion in 2010. That’s billion, with a ‘b.’ Beyond the financial benefits, increasing the alcohol tax will also save lives, it will improve the health of our babies and reduce underage drinking.”

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