A key Senate committee gave preliminary approval Thursday to a new 10-cents-per-drink tax on all alcoholic beverages, a step that would raise an estimated $62 million per year for the state.

The Senate Commerce and Consumer Protection Committee unanimously approved Senate Bill 1232, which would impose the new tax starting on July 1, and end the tax on June 30, 2024.

The measure was opposed by the Hawaii Food Industry Association, which argued that “this surcharge amounts to an extra tax on businesses that sell liquor, many of which are already struggling” during  the pandemic.

Also opposing the bill was Tim Lyons, lobbyist for Anheuser Busch Cos., who said that alcohol sales are price sensitive.

“History has shown throughout the nation, as the price goes up, sales go down,” Lyons said in written testimony. “As sales go down, unemployment goes up.”

Brewer Ken Caldwell makes adjustments on a myriad of handles controlling various valveson the wort kettle during the processing of making wort before hops are applied. 10 may 2017
Brewer Ken Caldwell at the Honolulu Beer Works in 2017. Senate Bill 1232 would add a surcharge of 10 cents per drink on all alcoholic beverages. Cory Lum/Civil Beat

“We also do not believe that you can tax people into drinking responsibly. People who drink in moderation do not have health problems … abusive drinkers will drink regardless of the cost,” Lyons  wrote.

But Cynthia Okazaki of the Hawaii Alcohol Policy Alliance said in written testimony it has been 22 years since the state tax on alcohol was last increased.

“This tax will be paid only by those who consume alcohol and not by the general public,” Okazaki wrote.

Excessive drinking can cause a range of health and social problems ranging from motor vehicle crashes and violence to unplanned pregnancies and Fetal Alcohol Spectrum Disorders, according to Chelsea Gonzales, the alliance coordinator for the Hawaii Alcohol Policy Alliance.

Gonzales said in written testimony that the federal Centers for Disease Control and Prevention estimates excessive alcohol consumption costs Hawaii nearly $1 billion dollars a year.

“Alcohol does not pay for itself, and it’s about time that we make a small change to address that,” Gonzales wrote.

The measure was also supported by the Hawaii Substance Abuse Coalition, Mothers Against Drunk Driving Hawaii, the Hawaii State Teachers Association and the Hawaii Fetal Alcohol Spectrum Disorder Action Group,

Supporters of the measure argued that increasing the cost of drinking will reduce consumption, but not everyone agreed.

Garrett Marrero, president of the Hawaiian Craft Brewers Guild, said there is no direct correlation between higher liquor prices and lower consumption. He agreed a higher tax would be a disincentive to some people to drink, but warned the measure would drive consumption to less expensive, mass-marketed and mass-produced beverages, meaning mainland producers.

“This absolutely hurts the small craft brewers far more than it does very biggest producers,” he said.

Senator Kurt Fevella says maybe DHHL should be shutdown.
Senator Kurt Fevella in 2019. The lone Republican in the state Senate supports the new tax as a way of reducing alcohol consumption. Cory Lum/Civil Beat

The bill won the support of the lone Republican in the state Senate, Kurt Fevella.

He agreed that the tax was a good idea despite worries over the timing due to the slump in the business community.

“They’re always going to be bringing up a reason why we cannot move something forward because everybody’s getting hit hard, but having these taxes and going for the right reasons forward, our community having less consumption of liquor, and saving our families on the streets and the violence,” the bill is something that should be approved, he said.

Senate Commerce and Consumer Protection Committee Chairwoman Rosalyn Baker, meanwhile, said the extra revenue from the new tax “would be very useful at the moment.”

Gov. David Ige and the Legislature are coping with a very large budget shortfall caused by the sharp decline in tax collections during the pandemic.

The measure now goes to the Senate Ways and Means Committee for further consideration.

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