Alcohol Sales Tax Increase Has Essex-Middle River Business Owners Worried About Future

Rhonda Lozinak isn’t sure how much more she can handle as a small business owner.

The owner of Wild Duck Café in Bowleys Quarters said she hung on during the height of the recession as business waned at her restaurant and she was forced to reduce staff.

Now, she admits business is slowly recovering, but high fuel costs and consumers still wary of the nation’s economic future have made many hesitant to increase their discretionary spending.

Lozinak believes her summer business—her busiest season of the year—will be negatively impacted come July 1 when the state’s sales tax on alcohol jumps from 6 to 9 percent.

The alcohol tax increase is expected to raise an estimated $85 million a year, with about $47 million going to school construction in the first year and additional $15 million being utilized to assist the developmentally disabled and other health care programs.

“These taxes will not be good for small business,” Lozinak said. “You’re going to start seeing some small businesses in Maryland decide it’s not worth it because of all of these taxes.”

Lozinak said she is already seeing the impact in her business and knows it will only get worse once the tax increase goes into effect. She points out that she is already noticing some customers buying one drink instead of two and buying the daily specials instead of the pricier entrees.

“I know some customers have told me they plan on going over to Delaware where there is no sales tax, buying their alcohol there and then having parties at home rather than coming out to spend their evening with us,” Lozinak said. “I can’t blame them when you have 9 percent sales tax here and none just a few miles away.”

The increase in the alcohol tax, which came just a few years after the overall sales tax increase from five to six percent, was one of the more contentious bills debated during this past General Assembly session, which ended last month.

Governor Martin O’Malley signed the tax hike into law on May 19, stating the bill will have significant public health benefits as the increase will prevent almost 6,000 cases of alcohol abuse or dependence every year.

Many opponents of the bill objected to the way late changes were made to allocate a large portion of the funds toward school construction for urban and suburban areas. Among those receiving funds from the tax were $12 for Baltimore City, $9 million for Prince George’s County and $7 million for Baltimore County.

Among those that voted against the tax increase was

The Dundalk Democrat and chairman of the Baltimore County delegation said this was just the wrong time to be increasing taxes that impact small businesses so much. He also was upset that the bill was passed after a balanced budget had been approved, making the additional funds unnecessary.

“Our economy is very fragile right now and increasing taxes like this is going to have a negative impact on small businesses,” Olszewski said. “I especially feel for border communities like Ocean City, Cecil County and Western Maryland as customers are going to opt for cheaper prices across state lines.”

However, even with the limited funds going to health care needs, many of the bill's original supporters expressed gratitude for the state passing the legislation.

“With the passage of the alcohol tax, the Maryland General Assembly has led the way nationally by enacting prudent fiscal policy that both addresses the heightened need for disability services and accomplishes the public health goal of reducing alcohol abuse,” said Linda Raines, chair of the Maryland Mental Health Coalition, in a statement.  “We applaud our state senators and delegates for protecting people with disabilities in these tough economic times.”