#1 Liquor

More than a year after state residents began paying higher taxes on beer, wine and liquor, alcohol sales have flattened compared to neighboring states.

Sales in the state’s alcohol industry have been lackluster in 2012, trailing the national average and falling below a boom in sales for neighbors Virginia, Delaware and Washington, according to David Ozgo, Distilled Spirits Council of the United States chief economist. Alcohol is moving slower from local businesses’ shelves as a direct result of its 50 percent sales tax hike — from 6 percent to 9 percent — that went into effect July of last year, Ozgo said at a state meeting earlier this month. However, many students said they aren’t deterred by a higher number on their liquor store receipts.

“I don’t know how long it’s been in effect; I wasn’t aware that it went up,” said Ryan Kennedy, a senior environmental science and policy major. “I would be surprised if people even noticed it.”

The demand for alcohol doesn’t change across the board when prices go up, said family science professor Mitch Mokhtari. Beer has a low price elasticity of demand, meaning consumers will not drastically change their spending habits for beer in light of a price increase. However, wine and liquor have significantly higher price elasticity, so when prices go up, consumers are likely to either cross state borders or stop purchasing them altogether.

This year’s anemic sales in the alcohol industry have drawn criticism from liquor lobbyists, who argued the tax would force residents to take their purchasing power across state lines. However, public health advocates who want to curb alcohol abuse said the tax is doing its job.

The law aims to limit access for young people, who are “price sensitive” and more receptive to a jump in cost, said Vincent DeMarco, president of the state’s Health Care for All Coalition. However, Kennedy said the tax is still “nominal,” and he doesn’t see students making a cross-border run for cheaper booze.

But some state residents have cut back their alcohol spending, to the detriment of the state’s alcohol industry. And the stagnant sales growth suggests the tax is doing what many proponents intended: successfully fighting the societal ills of alcohol abuse, DeMarco said.

“The whole goal here was to reduce underage drinking and reduce alcohol abuse, and we think that’s happening,” DeMarco said. “The alcohol industry shouldn’t want there to be underage drinking and alcohol abuse.”

However, while the law was expected to raise about $85 million to be used for state health and community service purposes, it has fallen short of those initial estimates, raking in $70 million.

That revenue will do very little to help drive down the abuses associated with alcohol, said Bruce Bereano, a state lawyer who has lobbied for alcohol distributors, and the true measures to put an end to unlawful underage drinking are being overlooked.

“It’s just a lot of bunk,” Bereano said. “The way you get teenagers is enforcement; nobody pays any attention to enforcement.”

The blame for the stagnant sales and unrealized revenue goals comes from residents crossing state lines, primarily into Delaware, to take advantage of lower tax rates, according to Ozgo. Delaware has no sales tax on alcohol.

“In general, cross-border purchases of anything happen if there is a price differential for any product … assuming there’s not much of a transportation cost,” Mokhtari said. “To some extent, that takes place to offset the impact” of the tax.

Given most residents’ proximity to state lines, Bereano said the sales tax doesn’t prevent the possibility of residents buying alcohol elsewhere.

“I just wish that public officials would look at a map of the state of Maryland,” he said. “We’re nowhere from 30 to 90 minutes tops to another jurisdiction.”

DeMarco doesn’t buy that argument — and on a college campus, few students make a trip out of the city for their weekly purchases, let alone out of the state.

“People aren’t going to spend $4 in gas to save a little bit of money to get their alcohol,” he said. “It doesn’t make any sense.”