The Liquor Tax

Saw a couple of media stories on the end of the sales tax on beverage alcohol, including the symbolic dumping of wine into the harbor by store owners. As a former owner of a package store I have tried to avoid these stories on the blog for obvious reasons. But I cannot resist this one. Critics of the repeal have pointed to the underfunding of “substance abuse programs” that have been funded by the imposition of the tax. Fair point, as far as defending what are worthwhile programs. The rest of it is all so much nonsense, based on what are underlying distastes for the products sold. Destroying an entire regional industry and the jobs and capital invested is no joke, but to hear critics of repeal talk store owners who have had their businesses essentially destroyed by Massachusetts tax policy should just shut up and take it, and watch their life investments go down the drain. So what are the tax policies that have wiped out border stores that sell alcohol? Let us list them.

1) The Bottle Bill- The bill has had some undeniably positive impacts statewide, and I believe it likely has majority support in the Commonwealth. But it has been, and continues to be, an unmitigated disaster for border retailers. Let us remember the bottle bill campaign, in which proponents argued that the legislation would lower costs for consumers. It has raised those costs substantially, including handling costs that were about 50% of the added costs for deposits. The campaign by proponents lied about the price consequences, and border retailers were priced out of the market for bulk purchases of beer and soda. The honest approach would have been to say that you will have to pay more, but the benefits outweigh the additional costs to consumers, and border retailers will have to accept a huge loss of business. And it was a huge loss of business. New Hampshire has no bottle bill, and prices their products so far below Massachusetts that business fled in droves to New Hampshire.

2) Tobacco Tax- Border retailers have seen a huge hike in tobacco taxes, including the imposition of a sales tax where none had existed, and a massive hike in the tax assessed at the wholesale level. Before the massive increase in tax (to fund tobacco cessation programs) New Hampshire had a large competitive advantage. after the series of Massachusetts tax hikes New Hampshire was free to raise some revenue by hiking their tax on tobacco, but making sure that there was still a large competitive advantage for their state. Net Impact: Retailers on the Massachusetts border are essentially out of the tobacco business.

3) Beverage Alcohol Excise Tax- Massachusetts assesses a tax on beverage alcohol at the wholesale level. Before the imposition of the sales tax on top of the excise tax the State of New Hampshire was selling major products BELOW the WHOLESALE price paid by Massachusetts retailers. After the imposition of the sales tax the spread became so wide that it was not a competition but a bigger rout that started wiping out what little was left of border business.

The shrieks of protest from those that simply don’t understand business is laughable. Many of the retail stores are mom and pop operations with little infrastructure to collect and pay sales tax. I have always wondered why the Legislature did not apply an increase to the excise tax if they really wanted some additional revenue from the product. That increase is paid without fail, and would at least spare the retailers the pain of additional paperwork. Ahh, but that would make too much sense. When Marian Walsh proposed this (sales tax on alcohol) some years ago she at least had the honesty to speak the truth to border retailers. She said something to the effect of, “maybe you should not have invested in a business this close to a control state (New Hampshire). Yes we get it up here on the border. Better to leave investment in retailing operations, not just package stores, to the New Hampshire side of the border, with all of the attendant jobs, property tax revenue,and capital investment, to the Granite State.

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