Businesses fight raising alcohol, tobacco taxes

As state senators began discussions yesterday on raising alcohol and tobacco taxes to help balance the budget, sellers and distributors claimed that any price increase would force customers across state lines and cost jobs in Maryland.

A year after raising the cigarette tax by 34 cents to $1 a pack to pay for education, the Senate is considering a further 36-cents per-pack increase to generate $85 million a year.

Lawmakers are also considering more than doubling the tax on beer, wine and hard liquor to produce almost $40 million a year. Taxes on distilled spirits have not been raised since 1955, and the tax on beer and wine was last increased in 1972.

The tax plans were debated in the Senate yesterday, a day after the House of Delegates considered its menu of revenue proposals. House options include an income tax surcharge on the state's wealthiest residents and a potential sales tax increase.

But, as in the House, lobbyists and well-organized opponents emerged in the Senate yesterday, saying any tax increase would be bad for business and would harm the state more than help it.

"This is going to be counterproductive," said J. William Pitcher, a lobbyist representing the Mid-Atlantic Petroleum Distributors' Association, whose members sell to stores that make much of their money from cigarettes. "You are hurting these small businesses. You've probably reached a saturation point with this tax in terms of driving people to quit."

Sellers and distributors of beer and wine said they operate on such thin margins that they won't be able to afford to pass the tax on to customers, meaning the businesses would absorb it, lose money and cut jobs.

"You cannot tax an industry that is slightly declining or has been flat for 13 years," said Nick Manis, a lobbyist for Maryland beer wholesalers.

Anti-smoking activists countered that a tobacco tax saves lives while generating money, because it will force smokers to quit and prevent young people from starting.

Senators are considering two alcohol tax-increase proposals: One would send the money into the state's general fund; a second -- which contains a slightly lower increase -- would earmark the money for the state's cash-strapped trauma system.

House and Senate leaders say they are looking to replace the $395 million in the coming year's budget that Gov. Robert L. Ehrlich Jr. has based on slot machines and are looking for other sources.

Ehrlich has said he would veto sales or income taxes. Greg Massoni, a spokesman for the governor, also said that "sin taxes" such as on alcohol and tobacco would be vetoed.