State’s alcohol industry moves against tax hike

Brewers, bar owners, restaurant owners, distillers, bartenders and distributors showed a popular front Tuesday as the Alaska Senate’s Labor and Commerce Committee took public testimony on a bill to double the state’s alcohol taxes.

The increase would make Alaska’s alcohol taxes the highest in the United States.

“I know the state’s in a fiscal situation and we’ve got to pull together, but … if you’re a drinker of alcohol, you’ve got to pull a little harder, it seems like,” said Jack Manning, owner of Juneau’s Duck Creek Market and president of the Juneau Cabaret, Hotel, Restaurant and Retailers Association.

The bill is one of three that raise consumption taxes as part of Gov. Bill Walker’s comprehensive budget plan. To eliminate the state’s $3.7 billion annual deficit, the governor has proposed raising three consumption taxes (tobacco, alcohol and fuel), raising three business taxes (mining, fishing and cruise ship tourism) and making three large-scale changes (oil and gas tax credits, income tax and Permanent Fund investment spending).

Senate Bill 131 calls for increasing the tax on a “drink” (defined by 1 ounce of liquor, 5 ounces of wine or 12 ounces of beer) from 10 cents to 20 cents.

Most beer produced in Alaska falls under a small-brewery exemption that taxes the first 60,000 barrels produced each year at 3.3 cents per drink. That tax would also be doubled.

Sen. Gary Stevens, R-Kodiak and a member of the committee, said he enjoys a martini from time to time, and it may not be accurate to look at that one-ounce figure as proper for a drink served at a bar. A drink might have two or three ounces of liquor in it, meaning a tax increase of 20 to 30 cents.

A standard growler of beer, or 64 ounces, would cost about 35 cents more.

The tax hike is expected to raise another $40 million per year (doubling the state’s existing $40 million alcohol revenue), but by law, half the state’s alcohol revenue goes to a drug abuse and prevention fund.

That had some on the committee wondering if the tax increase’s economic effects are worth trimming the state’s deficit by less than 1 percent.

“How many restaurants are going to close because they rely on this?” asked Sen. Kevin Meyer, R-Anchorage, Senate President and a member of the committee. “Our economy’s already weak enough; I don’t think we want to make it even weaker.”

Ryan Makinster, executive director of the Brewers Guild of Alaska, pointed out that Alaska has 25 operating breweries employing 965 people statewide, and another five or six are planning to operate. SB 131 would make Alaska’s tax rate on beer the highest in the country.

Dale Fox, president and CEO of Alaska CHARR, said his organization is “obviously opposed to this bill. In most categories in Alaska, we’re the least taxed in the nation. In alcohol, we’re the most taxed in the nation.”

With higher taxes, Alaska alcohol retailers and producers will face competition from online sales, he said. “The tax difference will more than pay for the FedEx bill.”

Ken Alper, director of the state’s tax division, and Brandon Spanos, his deputy, presented the bill to the Senate committee.

Addressing Spanos directly, Meyer said he’d heard the state wasn’t interested in deterring drinking. “It’s strictly a cash grab?” he asked.

“Senator Meyer, that’s correct,” Spanos responded.

SB 131 is expected to receive further hearings in the Senate Labor and Commerce Committee. Public testimony, including comments from the Alaskan Brewing Company, was expected 6-8 p.m. Tuesday night, after the Empire’s evening press deadline. The results of that testimony will be reported in Thursday’s Empire.

A House version of the bill, House Bill 248, has already been heard three times in the House Labor and Commerce Committee.

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