ANNAPOLIS | Maryland health advocates are lauding the state's alcohol tax increase as a boon for public health, but some business owners worry it could hurt sales - or at least cause some managerial headaches.
Maryland's sales tax on alcohol rises Friday from 6 percent to 9 percent in accordance with a law passed in this year's General Assembly. The increase is expected to generate $85 million in revenue in its first year, $15 million of which will go to programs for the disabled. Remaining funds will go to schools and school construction.
Health advocates spent years fighting for the increase, which they say will save lives and improve public safety. They hope that in future years, revenue from the tax will go entirely to health services.
"It is going to save lives and provide the money we need for people," said Vincent DeMarco, president of the Maryland Citizens' Health Initiative and a leading lobbyist for the increase.
Supporters have predicted the tax hike could also reduce underage drinking and other crimes by decreasing alcohol consumption in the state by as much as 2 percent, but opponents have worried such a reduction could hurt many small-business owners.
Bobby Jones, general manager at Acme Bar and Grill in Annapolis, said he doesn't expect the tax to significantly curtail sales but noted owners will likely have to increase prices to maintain profits.
"It's not like we're making money hand over fist," he said, adding that the increase comes at a time when many businesses are just starting to recover from the economic downturn.
"Sales were creeping up and now we get dug into immediately," he said.
Mr. Jones also said many establishments avoid small change and include tax in advertised drink prices to make for quicker transactions, meaning they will likely raise prices on some drinks by 25 or 50 cents rather than just a handful of pennies.
Beyond its effect on prices, he said the biggest impact of the tax is being felt by business owners who will have to change their bookkeeping procedures to keep track of separate tax rates for drinks and food.
He said he expects to spend Friday morning updating Acme's computerized point-of-sale system to change the pricing formulas for hundreds of drinks.
"We'll probably start when we close at 2 a.m., and we'll be lucky to be done when we open at 11 a.m.," he said.
While some opponents have decried the tax increase's effect on business, others have criticized how less than 20 percent of its first-year revenue will go to the disabled, despite the fact that health advocates spent years leading efforts to secure the increase.
The tax's $86 million in expected second-year revenue will be up for grabs in next year's General Assembly, and Mr. DeMarco said he hopes 100 percent of the funds will go to underfunded programs for the disabled.
"We're hoping to get more money to alleviate the issues we were going to address," said Sen. Verna L. Jones-Rodwell, Baltimore Democrat and the tax increase's lead sponsor. "And I don't want to limit it to just [the tax increase]."
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