I don't know how I'm going to vote on the Alcohol Tax issue this April, which is weird, because I usually know these things early on. At its most basic level, it comes down to the following:Alcohol tax proponents say that an alcohol tax will (a) reduce alcohol consumption, (b) reduce crime, and (c) shift part of the burden of payment for an estimated $17 million in alcohol-related municipal costs to people who consume alcohol, instead of the property tax payers who currently foot the bill.
The opposition lies with alcohol retailers (restaurants and bars) who believe that such a tax would cut so deeply into their bottom lines that many establishments could no longer operate profitably - certainly not without massive layoffs and price increases, the latter of which would further damage their ability to operate.
As one delves into the more insane, technical dimensions of these issues, however, the sketchy boundaries between reality and fantasy, true and false, begin to break down rapidly. Statistics are always sketchy, and as a social scientist, I have problems with the theoretical grounding that has led to the pro-tax statistics. I'm much more of an "educate, don't punish" guy myself, feeling that insidious psychological warfare is better than brute force as a means of subduing the people (eg, controlling alcohol-related costs and crime.)
The industry information is much worse. They claim the tax could put them out of business, but rely on anecdotal evidence, numbers pulled out of their heads, and have no scientific studies to demonstrate the viability of their arguments. I need to see an honest, unbiased analysis of the impact on the industry before I can accurately size up their situation. This study has not been done.
The Basics
Last year, an 8% alcohol tax was narrowly rejected (Prop 38: Yes: 33,887 (49.03%); No: 35,222 (50.97%)) by Anchorage voters. Anchorage alcohol tax issues have been a big part of the political discourse since the late `80s, and the `95 municipal election is no exception.
This year's tax proposal differs from `94 in basically one respect - the tax will raise revenues within the tax cap and pass the savings on to property owners. The tax is a textbook example of regressivity - it transfers money from the poor to the rich.
Heavy drinkers stand to pay hundreds more in taxes each year, regardless of whether they own property or not, and the largest property owners will see tax relief in the tens of thousands of dollars (for example, Carr Gottstein will save $84,720, and former. Gov. Wally Hickel will realize a windfall of $60,180.) According to city estimates, the average property tax relief on a $100,000 home is $72, and average household alcohol expenses would be about $49, based on the current figure of $610 per year spent on alcohol per household.
The cost to the city of implementing the change is an estimated $236,000 for four auditor/controller positions, and $113,000 in first year startup costs, according to Jerry Anderson, Chief Fiscal Officer. Estimated revenue is about $8 million per year. While dedicated funds are unconstitutional, Proposition 3 proponents indicated that the funds would be informally channeled through the collection process, in the same way liquor license fees are currently directed towards alcohol-related costs.
The Players
Proposition 3 is the brainchild of Jim Crary, a former prosecutor from `83 to `85, now an attorney with ATU. "I saw the human effects of alcohol abuse as a municipal prosecutor," says Crary, speaking of battered women, ruined families, grisly auto wrecks, and violent assaults.
As he tells it, he was amazed at the degree to which alcohol was involved in crime, and began to research the connections. After coming up with information indicating an alcohol tax was a good idea, he was compelled to pursue the issue in the public interest.
His `team,' which essentially consists of a few volunteer signature gatherers, planners, and cohorts, is composed mainly of attorneys around town - and one municipal employee from Health and Human Services, Joan Diamond, who specializes in injury analysis and prevention. Most of them will contribute a few hundred, maybe a thousand dollars each to the campaign, the major source of the group's paltry budget - somewhere in the $15,000 range.
"My main focus is to make alcohol pay to cover the costs of alcohol abuse," says Crary, "and there's an equally strong argument from the public health perspective... 85 percent of the cases I dealt with were alcohol-related, and if people could see this stuff like I did, unless they make money off of alcohol, they'd think this tax is fair." Alcohol-related incidents are defined as those where alcohol was present or reported present on the scene or in the system of anyone involved.
Talking with Crary really made me think about the use of the word `Citizens' in the alcohol industry lobby's organization - "Citizens Opposed to Senseless Taxes (COST)". Why Crary didn't seize the word immediately is beyond me, but it clearly suits his group better.
- "We can't win this on the issues," says Johnson
When I asked Carol Wilson, COST member, Executive Director of The Anchorage Restaurant and Bar Association (ARBA) and Executive Director of Alaska Cabaret, Hotel, Restaurant and Retailers Association (CHARR), why they chose the word, she said they just liked the way it sounded, "We're not hiding our light under any bushel and laundering money or anything."
As I said before, the opponents of this tax are alcohol industry heavy-hitters. Their projected budget for the "No on 3" campaign is $146,000, and as of March 24th, they had already raised more than that - $171,465. Total expenses prior to March 21 came to $38,177, all paid to Northwest Strategies, the firm running their campaign.
COST gets its funding from three types of sources, and has tried to raise about a third from each: Local alcohol retailers, which includes almost every bar and tavern in town; trade associations, including ARBA, CHARR, the wine wholesalers, etc.; and large nationwide distributors like Anheiser-Busch($18,414), Coors ($5,493), Miller (approx. $11,000), Jim Beam, and many others.
Says Wilson, "COST was formed for one purpose: to defeat this tax, because we know it will be destructive to our industry.. Our members may be cutthroat competitors, but [they are in alignment] on this issue."
Yes, COST is dedicated to preserving the profit margins of the alcohol industry, but Wilson had a point, "When did profit get to be a dirty word in America? There are very narrow profit margins in this business, and we pay the same taxes as any other business. Plus, our product is taxed at the State and Federal levels, much of which is transferred [into city coffers]."
The Campaign
The Research Group, Inc. is Crary's hired gun. He may only to be able to afford a pea shooter, but Tom Begich's campaign strategy/polling firm has good aim. Past polls (including the COST committee's Dittman-authored baseline poll a couple months ago on this issue), have found Anchorage voters to be highly open to an alcohol sales tax, and Crary came within a hair's breadth of winning the last election. This year he has the generally-recognized benefit of his tax being below the cap, the reason both he and the industry feel he lost the last election. "My preference would be to raise additional revenues with the tax," says Crary, "But last year the tax was over the cap and the voters complained."
Research Group would be a killer place to work. The office is a maze of small rooms, connected to form a strangely twisting passageway with a large office and small boiler room for phone polling at the end. The atmosphere is busy, but extremely relaxed. Cool conversation is the rule here, punctuated with laughter and insightful political commentary. The group is young - of maybe eight people in the office Saturday, seven were in their mid-20s. They were also people I hang out with socially, which was a little weird for me when I found out they worked for the strategist doing the "Yes on 3" campaign, among others. Then again, it was also a little weird covering the restaurant and bar industry, because they are strong supporters of our paper.
Research Group and Jim Crary don't have much money, and they seem to be getting a late start. While the opposition has finished their first tracking poll to determine whether their TV and radio ad campaign has "moved people," Research Group has yet to design its first advertisement.
Northwest Strategies would also be a cool place to work, but for different reasons. Their operation is class, with a couch and art-enhanced foyer, indirect fluorescent lighting, full-on offices and large-sized cubicle stations - a classy, ergonomically-sound, professional workplace. There's enough computer equipment to run a small country, and I was offered high-quality coffee. (Of course, they offered pizza at the Research Group, which had a higher cash value to be sure, so make of it what you will.)
- Anchorage has the highest per-household yearly consumption of any major US city - $610 per year
Lana Johnson of Northwest is running their campaign. A former Managing Editor of the Anchorage Times, Johnson has a head for election politics and the resources to pull off an effective campaign.
"We can't win this on the issues," says Johnson, "We're focusing on the public policy arguments - it raises no new revenues, doesn't adequately address the problem of abuse, may cause a loss of jobs, and it imposes an extra bureaucracy and burden of collection on the city. If the COST committee had spent what we have on this campaign addressing the problems of alcohol abuse, the city would be a whole lot better off."
Really, the tax authors should have considered the industry in their plans, if only to establish good relations and mutual trust. Instead, they leave the alcohol industry at the mercy of market forces nobody fully understands. Proactive industry research on the issue (the industry has had since 1985 to be looking into this), may have contributed to a plan everybody could live with, and certainly would have strengthened their argument.
As it is now, things are down to the wire, the industry feels backed into a corner, and they're just fighting to win. "We didn't attack the issue of the $17 million head-on, in effect calling city employees liars," says Wilson. "We've been acting indirectly by attacking the salaries of municipal employees in our advertisements. That's what we're going with, and it works. We're in this to win - we're not in a debating society with Mr. Crary."
April 18th is the municipal election, and the day Anchorage voters will get to decide on this controversial issue. Make sure you're heard- VOTE!
- Scott Christiansen contributed to this report
To Tax or Not to Tax
Nobody really knows what the effect of the proposed tax will be in terms of crime, alcohol consumption, and industry destruction. All anybody is doing is conjecturing what will happen based on past research conducted in other locations and theoretical background. But there's no doubt that an alcohol tax will have effects, the most definite of which is a reduction in alcohol consumption.What follows is just a basic outline of the arguments each side relies upon to advocate its position.
The Alcohol Industry - Case Studies
"I don't know if the Sourdough Mining Company can support its debt service if social drinking slacks off any more," says Jack Lewis, Chair of the COST committee, and owner of the Sourdough Mining Company and Peanut Farm.
Lewis laid out in detail how his businesses would be affected. Basically, he says, he practically gives food away, making a very slim profit margin. Alcohol sales keep his business alive, because alcohol has a longer shelf life and a greater dollar value (can be sold much cheaper - no cooks, servers, dishwashers, etc.) Lewis cites a trend towards reduced drinking as contributing to a shift in his business.
"We used to sell 70% food and 30% alcohol," he says, "That shifted recently to about 80/20, which is okay by me if it's a natural trend. But if this tax were to push our food to alcohol ratio to, say, 85-15, we couldn't make it.." Out of a 4-5% profit margin, Lewis believes the tax could pull out 1-2.5% off his bottom line, causing a massive restructuring effort, and a downward-spiraling chain reaction of lost business, higher prices, lost business, ad infinitum.
Duran Powell, General Manager of Chilkoot Charlies, says the tax is much more unfair to bars than package liquor stores, because two-thirds of the cost of bar beverages lies in service, and not the actual alcohol. He also feels alcohol retailers pay too much already in state and federal excise taxes.
According to COST, based on a 750ml bottle of distilled spirits costing $6.99/bottle: $3.74 goes to production, packaging, shipping, distribution, local wages, local taxes and, if anything's left over, a profit; $2.14 Federal Tax (30.5% of purchase price); and $1.11 State Tax (16% of purchase price). In addition, Fred Meister, president of the US Distilled Spirits Council, contends that, though federal taxes on alcohol have increased 29%, no additional revenue is collected, because sales drop off. After a particularly large increase in 1991, the federal government took in $89 million less than before the tax, according to the same opinion article.
"Traditionally, sales taxes come out of business' bottom line. The transition in accounting will probably cost me $10,000," says Powell, "People may not believe it, but it's true." Powell also says he'll have to raise the prices of beverages, raise the cover charge, and lay off seven employees. When I asked him if he'd really do all this if the taxed passed, he replied, "If the tax passes, call me 30 days later and see what I had to do."
Most businesses in the alcohol industry are operating on the edge already, and feel any drop-off in alcohol sales will cripple their ability to operate profitably and demand a restructuring effort.
Pro-tax arguments
Tax proponents point to many other states that impose alcohol sales taxes, where the alcohol industry still thrives. They also point out that Anchorage has the highest per-household yearly consumption of any major U.S. city - $610 per year. If that were reduced by even $100, Anchorage would still have the highest consumption rate in the country, compared to Los Angeles' $363.
Anchorage, the State of Alaska, the Federal Government, and the private sector have been tracking alcohol use and studying the dynamics of alcohol in society. This research strongly suggests that (a) alcohol taxes reduce consumption, and (b) reduced consumption translates into less crime. Furthermore, the studies consistently show alcohol sales taxes to be an effective method of reducing crime and alcohol-related costs to society. These reductions are low, but statistically significant.
In a study entitled, "Violence Reduction Through Restrictions on Alcohol Availability" (Cook and Moore, Alcohol Health and Research World, Vol.7 No.2, 1993), the researchers' regression analysis of 48 states' alcohol taxes from 1979-88 showed that a hypothetical 10% beer tax would reduce homicides by .3%, rapes by 1.32%, assaults by .3%, and robberies by .9%. Another study (Blose and Holder, 1987) found that counties that legalized the sale of liquor-by-the-drink experienced a 20% increase in alcohol-related traffic accidents, compared with counties that maintained the ban.
The definitive document on the Anchorage alcohol tax issue was prepared in April, 1989, by the Municipal Health and Human Services Commission. "Position Paper on the Proposed Tax on Retail Alcohol Sales" states, "...Anchorage dedicates approximately $16.8 million of its budget to support the provision of alcohol-related services. This amount is primarily spent in the Departments of Law, Police, Fire, HHS, and support to local non-profit[s]." This figure is determined by the total spending on police, for example, and then dividing the total by the amount of "alcohol-related" events that fall under that agency's jurisdiction.
As you may expect, this figure is more a guess than anything else, being heavily loaded with the assumption that if alcohol were present, then somehow the total cost of the incident is attributable to alcohol. 50% of municipal STD clinic funding, amounting to $1.5 million, is included in the figure.
Crary considers the tax a 'user fee,' designed to make users cover the costs of alcohol instead of the property owners who now cover those costs whether they drink or not.
The position paper lays out the implications and effects of a hypothetical 6% alcohol tax. The projected reduction in consumption is: Beer .7-1.8%; Wine 2.6-9.9%; and Liquor 10.8%.. A higher tax would theoretically affect consumption even more. The paper concludes that an alcohol tax is in the best interests of Anchorage citizens, serving to reduce consumption, and thus the problems associated with consumption.