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December 21, 2013

Proposal has excise tax increase going to treatment programs

Similar increases fail in other states

INDIANAPOLIS — While you’re imbibing your favorite Christmas spirits this season, consider this: Would you be willing to pay a few more pennies for the alcohol spicing up your eggnog?

That’s a question that a coalition of criminal justice and mental health officials are putting to legislators.

The group proposes raising the state’s excise tax on liquor, wine and beer by a few cents. It wants to put the money to treatment programs for addicts, in light of a new law aimed at diverting low-level offenders from state prisons and back into their communities.

Aaron Negangard thinks it’s a good idea. The county prosecutor for Ohio and Dearborn counties is a tough-on-crime guy who lobbied hard against the reduced penalties for drug dealing that are in the new law. He sees tough penalties as a hammer he can use to scare and punish illegal-drug profiteers. But he also sees too many addicts cycling through the legal system, going to prison from crimes of burglary and theft to fund their addictions.

“I’m a conservative Republican,” Negangard said. “And I don’t have a problem with putting another nickel tax on a six pack of beer to pay for some good treatment programs.”

Getting the conservative Republicans who control the Statehouse to see it his way is another thing. Gov. Mike Pence wants to repeal the business personal property tax that provides nearly $1 billion to schools, libraries and the local governments that would have to pay for more addiction services.

But no way are Pence or GOP legislative leaders ready to touch the “third rail” issue of raising the alcohol tax, fearful of what they see as a lethal political charge that comes with it.

Veteran Statehouse observer Brian Howey, editor of Howey Politics Indiana, remembers watching what happened when the General Assembly raised the motorcycle registration fee by $10 in 2007. The money was pledged for new efforts to track and research spinal cord and brain injuries. An outcry ensued, Howey said. A year later, that fee was gone.

“If the legislature and policy makers are willing to spend the political capital to make the case to the people that they need to raise taxes, anything is possible,” Howey said. “Falling into the trough of no-new-taxes is basically an evasion of reality. But it takes mature political leaders to make that case.”

According to the independent Tax Foundation, Indiana’s tax of about 7 cents on a six-pack of beer ranks it among the bottom 10 states. The alcohol tax rate hasn’t changed since 1981.

But the amount of beer that Hoosiers are consuming has changed. According to the state Department of Revenue, our taxable beer consumption has dropped from more than 127 million gallons in fiscal year 2009 to 117 million gallons in fiscal 2013. If you’re a beer distributor — and responsible for paying the excise tax — wouldn’t you be wary of any rise in cost?

Other states are tinkering with alcohol taxes. In 2011, Maryland pushed its alcohol sales tax from 6 percent to 9 percent. It was the first such increase in 38 years. In 2010, the State of Washington levied a temporary excise tax on certain beers, adding more than quarter to the cost of a six-pack. Illinois raised its alcohol tax in 2009 for roads and schools.  

But similar tax increases have failed this year in several states, including Hawaii, Maine, Georgia and New Hampshire.

Negangard said he understands legislators’ aversion to raising taxes, but he argues there’s a cost to be paid if local treatment programs aren’t funded. Low-level offenders are driving up the state’s prison population.

“They’re either going to have to spend money to build prisons, or they’re going to have to spend money on these programs,” he said. “You can’t just let people go without programs and expect crime rates not to go up.”

Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup. Follow her on Twitter @MaureenHayden

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