Delaware Legislators are considering three bills which would raise taxes on alcohol beverages, smokers, retailers, and the state’s hospitality industry. HB 212 raises taxes on distilled spirits, beer, and wine by over $14 million over the next two years, and HB 211 raises the tax on cigarettes to $1.60 per pack. Another bill (HB 210) increases licensing “fees” which will ultimately hit small business retailers, restaurants, and bars. These fees will also force businesses to raise prices on consumers. All three of the bills passed out of the Revenue and Finance Committee last week and are slated for consideration by the full House. There are currently amendments pending to sunset the alcohol and tobacco tax hikes, however tax sunsets rarely if ever occur. Consider we’re still paying for the Spanish-American War Tax on our land line phones.
Raising taxes on declining revenue sources like alcohol and tobacco hardly ever raises more funds. In fact, when Kentucky announced it would apply the state’s 6% sales tax to alcohol earlier this year, total revenue dropped over $1.7 million, 55% below last year’s revenue. Similarly, when New Jersey raised cigarette taxes by 17.5 cents, they collected $52 million less than expected. On the other hand, when Delaware’s spirits tax was slashed in the mid-1990s, sales increased by double-digits, bringing the state more revenue.
These taxes and fees are not the way to address Delaware’s overspending problem, especially during a recession.
Click here to see ATR’s letter to the Delaware House of Representatives urging them to oppose this bill.