Just when Wisconsinites thought the onslaught of taxes had ended, some state legislators want to belly up to the bar again on tax hikes. This time around they are considering taxes that would raise the prices of distilled spirits and beer.
Just this week, the Wisconsin Senate Judiciary Committee approved a 58% liquor tax increase – a possible $25 million tax hike. And on top of that, legislators are holding a hearing today to discuss hiking Wisconsin’s beer tax rate – another $58 million hike.
The bills’ expressed purposes are to fund programs to reduce the occurrence of drunk driving and alcohol abuse in the state. While these are laudable goals, they should be paid for by existing revenue, instead of raising taxes that will not cure social problems but will hurt Wisconsin citizens and businesses.
ATR and the Center for Fiscal Accountability have calculated that after accounting for excise taxes, fees, corporate taxes, and other state and federal taxes, consumers already spend 79.6% of the cost of distilled spirits and 56.2% of the cost of beer paying for government. If either of these tax increases pass in Wisconsin, that number will become even higher.
Raising excise taxes as a means of revenue creation never works either. For example, when Kentucky became one of the first states to pass a tax increase on alcohol this year, tax revenues plummeted. Only a few months after passage, revenue from distilled spirits taxes had dropped by over $1.7 million and was 55% below collections from the previous year. When excise taxes increase, people buy less of the product, or cross state lines to buy it elsewhere. (Click here for a parallel example explaining tobacco taxes.)
The only groups that will be worse off then the average consumer are those in the hospitality industry. Restaurant and tavern owners already have taken hits due to the economic recession, losing an estimated 4,200 jobs in the past year alone. An increase taxes now only increases their expenses and makes further cuts necessary. These taxes will only exacerbate the problem.
If state legislators want to lower incidents of drunk driving, raising taxes on all Wisconsinites is not the means to do so. Using existing resources would be more effective and would not necessitate increasing tax burdens once again.