FRANKFORT – Officials with the alcoholic beverage industry are putting on a full press defense against proposals to raise taxes on their products.
They plan to hold a rally at 2 p.m. Tuesday at the Capitol to protest any higher taxes on alcoholic beverages.
State lawmakers are considering raising the tax on alcoholic beverages, either on the wholesale or retail level, and increasing the state’s cigarette tax by as much as 50 cents a pack to produce a balanced budget, as the state Constitution requires.
It’s “a slap in the face” of the industry “that was caught off guard,” Bill Samuels, president of Maker’s Mark bourbon whiskey distillery in Loretto, said of the plan, which was described in generalities to reporters on Friday by legislative leaders.
Samuels and other industry officials were at the Capitol to try to convince legislators not to raise the tax on alcoholic beverages to tackle a projected $456.1 million shortfall in the state budget this fiscal year, which ends June 30.
Legislative leaders are expected to release specific details on the revenue-producing plan later Monday or Tuesday.
The top two legislative leaders – Senate President David Williams and House Speaker Greg Stumbo – said last Friday they hope their chambers can present to Gov. Steve Beshear by Friday a revenue-producing bill and a budget bill that could take effect immediately.
Stumbo said the Democratic-controlled House would like to see a blend of higher taxes on cigarettes and alcohol.
Rep. Rick Nelson, D-Middlesboro, is sponsoring House Bill 166 that would raise the wholesale tax on all alcoholic beverages from 11 percent to 20 percent.
That would generate between $67 to $70 million a year, Nelson said.
Some legislators are looking at placing a 6 percent tax on the retail sales of all alcoholic beverages.
Industry officials said either tax hike – wholesale or retail – is the wrong course to take.
“I don’t like it at all,” said Jim Rutledge, master distiller of Four Roses in Lawrenceburg, which has about 79 employees. “Every time there is a shortfall at all, we’re the first business looked upon to generate additional income.”
He said the last increase on the state wholesale tax was “just in 2005, where our tax rate went from 9 percent to 11 percent.”
The tax hike would cause a decline on one of Kentucky’s few growth industries, Rutledge said.
“As other states see what Kentucky is doing to a home-grown signature industry, others will follow suit, driving the prices up and decreasing the demand,” Rutledge said. “That will have a negative impact on our production.”
Rutledge noted that California taxes its wine industry at about 75 percent below the national average.
But in Kentucky, the bourbon industry is taxed at 60 percent above the national average, he said. “We’re already taxed at a higher rate than most of our adjacent states.”
Brian Bogard, director of administration government affairs for Anheuser Busch Companies in St. Louis, called the proposal “a tax on the working people.”
He said labor and business agree that the tax hike is not a good idea.
Instead of raising the tax on alcoholic beverages, Bogard said, the state should increase the 6 percent sales tax on all products.
The tax under consideration could raise the price of a 12-pack of beer by $3, said Ann B. McBrayer, president of Kentucky Eagle, a beer distributor in Lexington.
Tuesday’s rally at the Capitol is expected to draw employees in the industry and members of labor.
Aubrey Cheatham, with Teamsters Local 89 in Louisville, said he expects many union members at the rally.
Meanwhile, some beer companies are putting signs in restaurants urging patrons to contact their lawmakers to avoid higher beer taxes.
Also, an e-mail was sent to state legislators Monday on behalf of Pearse Lyons, founder and president of Alltech and owner of Alltech’s Lexington Brewing Co., asking them to oppose any additional taxes on alcohol.
“On behalf of Dr. Pearse Lyons, founder and President of Alltech, and owner of Alltech’s Lexington Brewing Company, may I take this opportunity to express our strong opposition to increasing the alcoholic beverages wholesale tax (HB 166) and to increasing the distilled spirits and malt beverages taxes (HB 237).
“Unlike cigarettes, Kentucky’s taxes on alcoholic beverages are already extremely high. Any additional tax increases on alcoholic beverages would put us out of step with our competitor states and do irreparable harm to the industry.
“It is our understanding that the Kentucky Chamber of Commerce believes as we do, and also opposes any additional taxes on alcohol. As you no doubt know, Kentucky already has the seventh highest levied taxes on alcohol in the nation, while Kentucky taxes on cigarettes are some of the lowest in the nation.
“Dr. Lyons, in an email to you last Thursday, stated bourbon was a Kentucky core business and that we should not endanger this business with a tax that could impact a global brand for Kentucky. Dr. Lyons has similar plans for Kentucky Ale and additional taxes may prohibit our ability to develop a global enterprise.
“To put it simply…we ask that you please oppose any additional taxes on alcohol in the Commonwealth of Kentucky.”