Liquor Leaders Say Alcohol Tax is Sinking Sales

Liquor sales in Maryland have stagnated in the past year, showing almost no growth since 2011, a change the industry attributes to an increased alcohol tax driving Marylanders to cross state lines in search of cheaper booze.

Cecil County has been particularly hard hit by the tax, missing out on business that used to come from Pennsylvania and losing local business to Delaware.

In September, deliveries for all alcoholic beverages were down 20 percent from last year in Cecil County, and deliveries for distilled spirits were down 57 percent, according to figures from the Comptroller's office.

“There is very, very strong evidence that the poor performance in Maryland package stores is the direct result of Maryland’s decision to increase the beverage alcohol sales tax to 9 percent in 2011,” David Ozgo, chief economist for the Distilled Spirits Council of the United States, said.

In July 2011, the state tax on alcoholic beverages increased from 6 percent to 9 percent. The tax was imposed with the goal of raising money for health care and potentially decreasing underage drinking and alcohol abuse.

Vincent DeMarco, president of the Maryland Healthcare for All Coalition, which advocated for the tax, said the law has met those goals. DeMarco said the decrease in deliveries is the result of a drop in teen drinking and alcohol abuse.

"We think this law is going to save lives, and that’s what those numbers show," DeMarco said.

Ozgo pointed to another analysis by his organization that showed an increase of sales in Delaware by 8.8 percent, based on data collected from member companies; his organization, a trade association, represents some of the nation's top distilleries,.

“A lot of Virginia residents who used to come into Maryland in search of lower prices are simply staying home, and many Maryland consumers are voting with their feet and making their purchases in Delaware,” Ozgo said.

Ozgo appeared on a consumer behavior panel at the Board of Revenue Estimates Economic Advisory Forum this month. The members of the Board of Revenue Estimates—Treasurer Nancy Kopp, Secretary of Budget and Management T. Eloise Foster and Comptroller Peter Franchot—heard from a number of business owners in fields ranging from real estate to defense contracting.

Chuck Ferrar of Bay Ridge Wine & Spirits in Annapolis told the Board that Cecil County has been hardest hit and urged it to take the loss of jobs and revenue from businesses closing into consideration.

Ferrar said Cecil County has historically had the highest rate of consumption in the state, not because residents drink more, but because of the county's proximity to Pennsylvania, where alcohol restrictions are tighter, causing customers to head south to get cheaper drinks.

Said Ferrar: “You got to look at the whole picture..."

This story was provided by Capital News Service.

Do you think taxes are driving Marylanders to buy alcohol across state lines? Tell us in the comments.