Chance of a Tax Rollback on Massachusetts Alcohol Sales?

Monday, February 8, 2010

Photo by philip

Update (July, 2010): The question of an alcohol tax repeal made it on the November, 2010 ballot.  Read more here.

This article on caught my eye recently.  It talks about two potential ways in which the 6.25% sales tax on alcohol that went into effect last year might be eliminated.  The first way is that the state legislature might decide on their own to remove the tax, and the second is through a ballot initiative.

An interesting twist is the idea that the tax at the point of sale might be removed but replaced with a similar increase into the excise rate (that was the sole source of taxation prior to the tax being increased from 0% to 6.25%):

"Sen. Michael Morrissey of Quincy, for one, would like to see the alcohol tax completely repealed. But Morrissey, co-chairman of the Legislature’s consumer protection committee, says lawmakers may propose a compromise that drops the sales tax but raises the excise tax to collect a similar amount."

I'd be in favor of this for a number of reasons.

First, the excise tax on alcohol has been long standing.  If it's decided that alcohol should continue to be taxed at a higher rate, the excise rate should simply be raised.

Things like alcohol and gasoline have so many taxes built into the price seen in front of you when making a purchase.  If taxes aren't applied until after the transaction, it's difficult to determine the overall cost.  Imagine pumping $15 worth of gas and having to calculate that it's going to be $27.34 in your head.  That would illuminate the super-high tax rates on these products, but it's not practical so the tax is bundled in to the per gallon gas as you pump.

Which makes the 6.25% tax at the point of sale on alcohol seem all the more ridiculous.  Taxes already make up roughly one-third of a $10 bottle of wine before you get hit with another 6.25% at the register.

Once the tax showed up last year, I think a lot of us had a feeling it would be 10x as hard to get removed as it was to get introduced because sin taxes are so easy to apply.  I'm referring to the thinking described in this comment on the Patriot Ledger piece:

"Given the huge damage to our society caused by alcohol, beer, wine, and spirits these products should be taxed at an even higher rate."

What's faulty with this logic is that it doesn't determine what the appropriate rate of taxation is.  It should just be indefinitely higher than whatever it currently is, and probably applied to soda and candy.  And anything else we can think of.

Like I've said before, I realize we all have responsibilities as citizens to pay for taxes and I appreciate things like quality publication education and that has a cost.  What I'm not in favor of is certain categories being taxed at an inordinately high rate, least of all ones that I care enough to write a blog about.

Check back later this week as I'll discuss another aspect on this issue- the idea of whether tax increases like this that target alcohol sales by dollar (rather than by volume) are suppressing alcohol sales and therefore causing the tax increase to fall short of its intended revenue goals.

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