Legislators propose doubling of ‘sin tax’ on many alcoholic beverages

Delaware legislators are proposing another “sin tax” proposal to a tax package aimed at reducing the state’s $382 million budget shortfall.

According to the bill, the measure would hike “the State’s alcoholic beverage tax rates. The rate for beer increases by 2¢ per 12 ounce can. The rate for wine increases by approximately 3¢ per 5 ounce serving. The rate for spirits containing more than 25% ethyl alcohol by volume increases by 15¢ per 750 ml bottle.”

Despite the description of a tiny increase, the bill would represent a  doubling of  taxes on many alcoholic beverages. The increase falls most heavily on beer, with distilled spirits getting a break.

DelawareOnline.com reported the measure came after legislators decided that Gov. John Carney’s budget proposal to sharply increase cigarette taxes was too rich.

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Delaware has kept a lid on alcohol beverage taxes, in part due to a desire to aid the state’s craft beer industry. The state has brewpubs and mini-breweries of various sizes in all three of the state’s counties. 

Delaware also benefits from lower alcohol beverage and tobacco taxes than in neighboring states, with  Pennsylvania having among the highest alcohol beverage taxes in the nation. A higher tax might reduce that advantage.

The lower taxes have contributed to a smuggling trade, with occasional apprehensions of individuals buying cigarettes and liquor and illegally selling the goods in New York and other high-tax states.

Until recently, the Keystone State operated a cumbersome system of state-owned liquor and wine stores and private beer distributors that led customers to make trips to Delaware. 

However, Pennsylvania has loosened regulations and now allows beer sales in grocery and convenience stores, with beverage distributors able to sell smaller quantities of beer. For decades, distributors could only sell brews by the case. 

Pennsylvania’s state-owned liquor store system is also the nation’s largest buyer of spirits and wine and offers discounts that can be comparable to Delaware prices.  Thanks to its smaller distribution network, Delaware beer and liquor prices are often comparable to nearby states, even wth the lower tax.