Alcohol tax hikes equal tax cuts
Many Montanans tend to oppose tax increases, across the board. So it’s surprising that we’re so complacent when it comes to the enormous burden imposed on us by the abuse of alcoholic beverages. According to a recent report from the University of Montana’s Bureau of Business and Economic Research, state residents collectively spend $510 million every year dealing with the effects of drinking. If each person in Montana had to pay an equal share, his or her annual alcohol tax bill would total around $530.
That’s a significant amount, but recent news stories about alcohol taxes being used to fund health care reform do not mention the financial burdens imposed on everyone by alcohol. Instead, the coverage often dwells on “Joe Six-Pack” and how he might soon pay more for beer.
Most media coverage leaves the impression Joe Six-Pack and his fellow Montanans oppose an alcohol tax increase. That’s not true. Findings from a 2008 survey conducted by Harstad Strategic Research showed a majority of Montanans favor increasing the tax on beer.
Not that the topic comes up very often. Tax rates on alcoholic beverages have been raised only twice since 1951, most recently in 1991. Since then, inflation has robbed the U.S. Treasury of more than one-third the value of the taxes — and, year-by-year, alcoholic beverages have become relatively cheaper.
These smaller price tags have led some to assume lower income Montanans will get hit the hardest by an alcohol tax increase. But compared to upper-income consumers, lower-income families buy fewer alcoholic beverages. People in the bottom 20 percent of income levels consume only 8 percent of alcoholic beverages; those in the top 20 percent account for 38 percent.
Some also worry about a tax increase robbing Montana of jobs generated by local breweries. It’s important to remember these valued businesses were sheltered from the last federal tax hike, and likely would be spared again.
However, for average Montanans faced with the rising overall costs of alcohol abuse, there are no tax breaks.
While Montana leads the nation in problems associated with alcohol, there are only 14 states with lower alcohol taxes. In addition to raising the federal alcohol tax, Montana should consider boosting state taxes by a nickel a drink.
My bill to do this failed in the Senate taxation committee earlier this year. Such legislation could generate as much as $24 million a year to fund aggressive prevention programs. It could support law enforcement, hospitals and others dealing with the true cost of drinking in Montana. And according to recent research, every dollar spent on prevention equals $10 in savings — money now lost to the taxing costs of another DUI crash or uninsured emergency room visit or new intake at an alcohol treatment center.
By investing in health care reform that is heavy on prevention, the state can transform tax hikes on alcohol into tax cuts for a majority of Montanans.
Sen. Christine Kaufmann, a Democrat, represents Montana Senate District 41 in Helena.