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Senate Testimony Calls for Dramatic Increases in Alcohol Taxes to pay for Obama Healthcare

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From Wine & Spirits Daily:

Senate Testimony Calls for Dramatic Increases in Alcohol Taxes

Beer, wine, and spirits producers today are casting a nervous eye over testimony yesterday to a Senate Finance Committee round table on how to fund the Obama administration's $1.2 trillion health care initiative. Three of the thirteen academia experts who testified recommended dramatic increases in the federal excise tax on alcohol as part of their plans.

CSPI exec director Mike Jacobson recommended that "Congress should raise alcohol excise taxes, tax all products equally on the basis of their alcohol content, and index tax rates for inflation. Boosting the tax on distilled spirits by 50 percent and equalizing the beer and wine rates would generate $12 billion in new revenues annually.

Robert Greenstein of the Center on Budget and Policy Priorities offered three suggestions:

1. The first option would be to raise tax rates back to where Congress set them in 1990 — i.e., to put them at the 1991 level, but adjusted for inflation since that time. Under this option, taxes would increase by 4 cents on a bottle of beer, to a total of 9 cents per bottle. They would rise by 3 cents on a glass of wine, to 7 cents per glass.

2. Another option is one included by the Congressional Budget Office in its recent health care options volume — to set alcohol taxes at a uniform $16 per proof gallon. This CBO option is designed to tax alcohol equally whether it is found in distilled spirits, beer, or wine. The current tax on spirits is $13.50 proof per gallon. This CBO option would raise that to $16 per proof gallon and also apply it to beer and wine. Under this option, the tax on a bottle of beer or a glass of wine would rise to about 14 cents — the increase would be 9 cents on a bottle of beer and 10 cents on a glass of wine. According to CBO, this option would raise $60 billion over ten years ($28 billion over five years).

3. A third option, and the one that would raise the most revenue of the three outlined here, would be to combine the first two options. Under such an approach, alcohol would be taxed across the board at the level that distilled spirits were taxed in 1991, when Congress last acted, with that level adjusted for inflation since 1991 and going forward. Under this option, the tax on a bottle of beer or a glass of wine would be about 18 cents. The increase would be 13 cents per bottle of beer and 14 cents per glass of wine.

While these academics pushed public policy reasons for the increases, Jonathan Gruber, PhD, professor of economics at MIT pointed out that "It is difficult to raise sufficient revenues from these sources, and these revenues will not rise at the rate of health care spending; indeed, they are likely to fall over time if we move the population towards healthier lifestyles."

Sen. Jim Bunning of Kentucky used most of his alloted time during the round table to bash the proposed tax increases on alcohol and tobacco. "Are you aware that federal, state and local taxes already make up 59 percent of the cost of a bottle of alcohol?" Bunning asked, calling such taxes regressive and unfair to the poor, according to the Congressional Quarterly.

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  • 2 weeks later...

Here's the latest on this topic as of June 3rd (it's good to see we're not in this fight alone, seeing how this tax will also apply to sweetened beverages as well): "New Drink Tax Widely Opposed"

Note that a tax on sweetened beverages will also have a direct impact on any spirit that is mixed at bars - hence, a double whammy tax on consumers should they decide to order a Rum & Coke!

Pass the following link along to your friends and customers and encourage them to click the TAKE ACTION tab to send an automatic email to your state legislators to oppose these progressive taxes on their livelihood as well as ours: Official Stop Hospitality Taxes Website

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Guest sensei

Alcohol & tobacco will always be an easy target by people looking to feel self-righteous. This is just the way it is. All we can hope to do is to mitigate the tax damage.

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