No change in tax, law on 'alcopops'

The Baltimore Sun

Despite intense pressure from public health advocates and parents, Gov. Martin O'Malley announced yesterday his support for a bill that ensures that popular flavored malt beverages would continue to be widely distributed and subject to a lower tax rate than other alcoholic drinks.

O'Malley said he would allow the bill to become law without his signature but signaled that during next year's General Assembly session, he would pursue legislation to change the way "alcopops" are regulated. The Democratic governor had pulled back from signing the bill during a formal ceremony last month, but last night he announced that he would not veto the bill. His last formal bill signing is scheduled for today.

Alcopops, which include some wine coolers and drinks such as Mike's Hard Lemonade and Smirnoff Ice, have been taxed and distributed the same way as beer in the state for four decades. Attorney General Douglas F. Gansler issued an opinion this year declaring that the flavored beverages should be regulated like distilled spirits, which are subject to a higher tax rate and limited to distribution in liquor stores.

"Allowing this bill to become law is a huge victory for the alcoholic beverage industry and an enormous loss for every parent of every teen in the state," said Del. William A. Bronrott, a Montgomery County Democrat. "This was an opportunity to rein in a product that has been proven to be particularly attractive to teens."

The General Assembly approved legislation on the last day of this winter's session that essentially overturned Gansler's decision. The liquor industry had complained that Gansler's opinion would wreak havoc in Maryland's complex system for regulating alcohol by forcing stores to pull products from shelves and creating confusion as to which products would be affected.

Groups including Mothers Against Drunk Driving had urged O'Malley to veto the bill, arguing that it would make it easier for teens to obtain alcopops. They contend that sweet, fruity additives mask the alcohol content - they are sometimes referred to as "cocktails with training wheels" - and that the drinks have become especially popular among girls for binge drinking.

Gansler said the outreach efforts from opponents, particularly in recent weeks, helped persuade O'Malley to address the issue next year. He said he would work with the governor on legislation, though his preference would be to distribute alcopops through liquor stores and tax them at a rate akin to the one assessed on wine. That would put it between the rate for beer, taxed at 9 cents per gallon, and distilled spirits at $1.50 per gallon.

"He clearly acceded to the wishes of the legislature," Gansler said. "But the ultimate goal is to keep this away from and inaccessible to children, and I think we're going to reach that goal."

O'Malley said in a letter that he would seek to create a fourth category of alcoholic beverages for alcopops, though he did not say how it would be defined. He noted that allowing Gansler's opinion to remain the law would have amounted to a 16-fold increase in the tax rate for the flavored beverages and that the bill codifies a long-standing practice not only in Maryland but also at the federal level and in almost every state in the country.

Although the legislature did hold a hearing on the bill, O'Malley said that such major regulatory and taxation decisions should be made "in the fullness of legislative consideration, not through the chance confluence of an opinion of the attorney general and the veto of a governor."

O'Malley also pledged to develop a "much-needed, forward-looking agenda to attack the issue of underage drinking." He noted that he signed legislation this year increasing the maximum penalty for furnishing or allowing underage consumption of alcohol from $1,000 to $2,000 for the first offense and up to $5,000 for subsequent offenses.

John M. Colmers, the state health secretary, requested the initial opinion from Gansler, saying that alcohol is the most widely abused substance among young people ages 12 to 20 and that treating alcopops as distilled spirits could have positive public health implications.

The liquor industry denies that the drinks are marketed to teens and contends that their companies strive to curb underage drinking. They point out that flavored malt beverages account for 2 percent of the beer market in the United States, according to industry tracker Adams Beverage Group.

"We look forward to working with the governor to do everything possible to curtail and eliminate underage drinking," said W. Minor Carter, a lobbyist who represents the Beer Wholesalers' Council of Maryland.

Critics argue that the liquor industry holds inordinate sway in Annapolis, based in part on its large campaign contributions. O'Malley has collected more than $230,000 from liquor interests over the past decade, according to an analysis published by The Sun this year.

Yesterday, O'Malley also announced that he would veto a bill that would have required the Maryland Department of the Environment to reimburse Anne Arundel County for costs incurred for monitoring and testing related to permit violations. Spokesman Rick Abbruzzese said it would be the governor's only veto.

That means that two bills extending some rights of married couples to domestic partners, including those regarding hospital visitation and medical decision-making and an exemption from real estate transfer taxes, will become law.

Although domestic partners could be gay or straight couples, gay-rights activists had advocated strongly for the bills.

The Maryland Catholic Conference, in asking O'Malley to veto the bills, argued that the California Supreme Court's decision last week allowing same-sex marriage provided further evidence that the legal status of traditional marriage is being eroded.

Also, legislation allowing for-profit companies to provide credit counseling in Maryland and a bill requiring that all Maryland tax preparers be licensed are expected to become law. The governor had been asked to veto both bills.

Consumer advocates said the debt-management legislation would open the industry to companies that prey on consumers while many are facing economic hardships. Proponents said it would give consumers more choice.

The industry has been tarnished by AmeriDebt Inc., a Maryland nonprofit accused of bilking debt-strapped consumers of millions of dollars. AmeriDebt also was affiliated with for-profit companies. Another company, Ascend One Corp., a Columbia-based company accused of abusive practices, lobbied for the bill.

H&R; Block, the largest tax preparer in the United States, had argued that the licensing bill would lead to higher costs for consumers and the loss of thousands of jobs. Proponents including Comptroller Peter Franchot, the state's chief tax collector, said the new law would protect consumers from operations that perpetrate fraud.

laura.smitherman@baltsun.com

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