Alaska: Alcohol industry reacts to Gov. Walker’s proposed tax increase

Source: KTVA

By Liz Raines

December 21, 2015

Gov. Bill Walker wants to increase taxes on alcohol as part of his long-term fiscal plan. A bill released last week, suggests doubling current, per gallon rates.

Alaska already has some of the highest alcohol tax rates in the nation – it’s number one on wine taxes at $2.50 a gallon, compared to the national average of 72 cents per gallon.

Alaska ranks second for taxes on beer and spirits. The state tax on beer is $1.07 a gallon, whereas the national average is 20 cents, while the tax on spirits is $12.80 per gallon, versus the national average of $3.75.

Dale Fox, President and CEO of the Alaska Cabaret, Hotel, Restaurant and Retailers Association (CHARR), said doubling those rates would put the state at six to seven times the national average for taxes on alcohol.

Fox called it a “hidden tax on the working man,” and said having rates so far above the national norm is crazy.

“Some people think that a beer after work is not a necessity, some of us think that it is. It depends on your job, I guess,” said Fox, who says about 80 percent of Alaskans consume alcohol from time to time.

He said that’s why recent municipal initiatives, in cities like Seward, Nome and the Mat-Su Valley, have failed.

“Whenever it’s come up to a vote in local communities, overwhelmingly the public is against taxes,” Fox said.

Fox said when the state hiked tax rates 15 years ago, it didn’t discourage people from drinking, but did change their behavior.

“Consumption did not go down. What did change was people bought what they could afford, so they might buy down in quality,” Fox said.

Duncan White, store manager at Value Liquor, said his customers already shop lower quality, and worried how they’ll be affected if there’s no room to go lower.

“A lot of times people are trying to get pennies and dimes and nickels together so they can get a bottle of beer for after work,” White said. “It’s going to affect everyone.”

White estimated Value Liquor would have to increase prices by $2 to $3 on most bottles to cover costs.

“We have a certain percentage we need to make to keep up with our prices, and if we’re taxed we’re going to pass that on to the consumer,” White said.

Ken Alper, director of the state tax division, said while it is a big increase, half of the proceeds from the tax will go to funding alcohol-related programs.

“Half of the money collected goes to the alcohol treatment programs, abuse programs and various other things the state involves itself in to help people who drink too much,” he said.

Alper said the tax increase isn’t targeting the alcohol industry, and pointed to bills to raise similar revenue by increasing motor taxes.

“If you’re looking at other similar taxes, there’s no reason not to look at an alcohol tax,” Alper said.