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Monday, April 6, 2009
3:24 PM EDT
Kelly William Cobb

Alcohol Tax Brewing in Indiana

The Indianapolis Capital Improvement Board (CIB), which runs the Indy Convention Center, Lucas Oil Stadium, and Conseco Fieldhouse, has run into a slight $47 million overspending problem.  So, following the lead of fiscal imprudence from Washington, D.C., the Indiana Legislature is taking up a bill to bail out the CIB by drastically raising taxes on the entire hospitality industry.

House Bill 1604 would raise the excise tax on liquor, beer, and wine sales by 100%.  This $42 million tax hike alone would cause the price of distilled spirits to rise by 7%, and would tack 25-cents onto a case of beer and 10-cents to a bottle of wine.  Additionally, the bill would raise the tax on Indianapolis hotel stays to 17% - the highest in the country - and raise the tax on food in restaurants.

Faced with significant backlash, State Senator Luke Kenley (R-Noblesville), who pushed the tax hike, also proposed sharing the revenue with other cities throughout the state to make it more politically palatable.  It should come as no surpise that the primary supporters of the bill at the Senate Appropriations Committee hearing last week included a few mayors salivating at the prospect of "free" cash.

Americans for Tax Reform and the Center for Fiscal Accountability have calculated that after accounting for excise taxes, licensing fees, corporate taxes, and other state and federal taxes, consumers across the country already spend 79.6% of the cost of distilled spirits and 56.2% of the cost of beer paying for government taxes and fees.

ATR's letter of opposition is below, or click here for a PDF.

 
Indiana State Senate
 
RE: Opposition to House Bill 1604
 
Dear Members of the Indiana Senate,
 
I write to urge you to oppose House Bill 1604, which will raise taxes across the board on the hospitality industry. The bill includes a massive tax hike on alcohol beverages, in addition to increasing the food and beverage tax and the hotel and motel tax. These taxes would likely not raise the stated revenue, but will hurt the state’s shrinking hospitality sector and unfairly target select industries and consumers.
 
House Bill 1604, as amended by the Senate Appropriations Committee, would raise the tax on liquor, beer, and wine sales by 100%.  This $42 million tax hike would cause the price of distilled spirits to rise by 7% and would tack 25-cents onto a case of beer. Additionally, the bill would raise the tax on Indianapolis hotel stays to 17% - the highest in the country - and raise the tax on food in restaurants.
 
These targeted tax hikes would result in higher prices for consumers and lower sales for a hospitality industry that is struggling to grow. Over the past year, two hundred jobs have been lost in Indiana’s hospitality sector and increasing taxes on consumers will only worsen this situation. Additionally, lower sales will mean lower tax revenues that will likely not meet the state’s projections. The last time the federal government raised the distilled spirits excise tax, it took 11 years to bring in more revenue.
 
Furthermore, this bill would result in significantly reduced cross-border purchases of alcohol beverages, thus harming retailers. Indiana has a lower excise tax on most beverages than neighboring states, and Kentucky just raised their tax on alcohol. Raising the alcohol beverage tax would hurt Indiana retailers who benefit from cross-border sales into higher taxed states.
 
HB 1604 unfairly bails out the Capital Improvement Board (CIB) and sports facilities by targeting unrelated industries for higher taxes. The Colts and Pacers are expected, but have not committed, to contribute $5 million each. It is patently unfair that those who use CIB facilities may pitch in a combined $10 million, but unrelated industries and consumers are required to foot the bill through higher taxes for nearly $50 million.
 
Americans for Tax Reform and the Center for Fiscal Accountability have calculated that after accounting for excise taxes, licensing fees, corporate taxes, and other state and federal taxes, consumers across the country already spend 79.6% of the cost of distilled spirits and 56.2% of the cost of beer paying for government taxes and fees.
 
I urge you to stand up for consumers and Indiana’s hospitality sector to oppose House Bill 1604 and any effort to raise the state’s tax on alcohol, food, or hotels. In this recession, tax increases will only serve to further depress economic activity. If you have any questions, please contact Kelly Cobb, state affairs manager, at (202) 785-0266.
 
Onward,
Grover Norquist
Posted by Kelly William Cobb on Monday, April 6, 2009 3:24 PM EDT
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