By Woodrow J. Hinton

Workers in Ohio's beer industry fear 99 bottles of beer might just languish on the wall if the state OKs Ohio Gov. Bob Taft's proposal to raise the state tax on beer.

As part of a two-year budget meant to overhaul Ohio's tax code and boost the state's lagging economy, Taft proposed doubling the excise tax on beer from 40.5 cents to 81 cents per gallon.

But if the idea is really to spur business in the state, why pick on the beer industry? Andy Herf, vice president of the Wholesale Beer and Wine Association of Ohio, can't grasp the logic.

"Why would we do something that's supposedly going to help manufacturing and then specifically attack manufacturers that have good, high-paying jobs?" he says.

His organization represents the state's many beer retailers, 70 wholesalers and two beer breweries.

"We work like crazy to get companies like this to come to Ohio and build and employ people, but we can't just tax them and no one else," he says.

Taft's press secretary, Mark Rickel, rejects charges that the governor is unfairly picking on the beer industry.

"That's not the case at all," he says. "This is about replacing the revenues, to some extent, that will be lost with some of these reforms."

The tax reforms he's talking about include a 21 percent decrease in the state's income tax and changes to the way the state taxes business.

Over the border again
Under Taft's new tax code, Ohio will quit taxing companies' inventory and profits, which Rickel says the creative accountants at larger corporations often manage to disguise. Instead businesses will be taxed more fairly on their total sales, he says.

But opponents of the beer tax say there will only be less beer sales to tax, because the higher tax will drive down consumption and drive jobs out of Ohio, the country's fourth-largest beer producing state.

Kevin Lee, plant manager for the Anheuser-Busch brewery in Columbus, estimates the tax will cost Ohio 1,500 of its 35,000 beer industry jobs.

"This excise tax says you have this great and powerful industry in Ohio, yet now we're going to penalize Ohioans," he says.

Because state laws mandate minimum markups on alcohol, the tax is going to be passed right along to drinkers, two-thirds of whom make less than $55,000 per year, according to a report for the Beer Institute.

"It unfairly hurts people who are low wage earners," Lee says.

Even the governor expects sales to drop, according to Herf. His own Office of Budget and Management factored a 6 percent loss in sales into projected revenues from the beer tax. At $59 million, that beer tax revenue comprises just 1/1,000th of the total two-year budget, Herf says.

The projected drop in consumption is a statewide estimate. But since all but one of the state's largest cities sit near state borders, it's mostly Columbus beer drinkers who are out of luck.

Those of us in Cincinnati will just take a jaunt to Kentucky.

Herf says Kentucky was also considering increasing its own excise tax on beer, which is already much lower than Ohio's. State officials reconsidered when they realized Ohio's new tax would just increase Kentucky sales, he says.

But not just beer sales.

"You're not just going to buy your beer over there, you're going to buy gas and groceries," Lee says.

The Kentucky factor is just one of many reasons State Sen. Mark Mallory (D-West End) hates the governor's budget.

"We are already in a situation where people leave Cincinnati and the state of Ohio to buy things in Kentucky like cigs and alcohol," he says. "I think that raising the tax on beer will make that situation even worse."

National experts actually told the Ohio Senate that people don't leave the state for cheaper prices, Mallory says.

"I said, 'Wow, you should come to Cincinnati,' " he says.

The syntax of sin tax
Beer isn't the only product getting Taft's tax treatment. The tax on a bottle of wine will rise 6 or 7 cents per bottle. Liquor taxes are going up, too.

But the highest tax hike, once again, is on cigarettes. That's the one that really gives State Rep. Bill Seitz (R-Green Township) fits.

"We raised the cigarette tax by 130 percent only three years ago and now we are raising it by another 80 percent," he says.

While the beer tax works out to about 10 cents more per six-pack, Seitz says, the tax on cigarettes is shooting up another 45 cents, to $1 a pack. Compare that to Kentucky's cigarette taxes, which are rising from a paltry 3 cents to 30 cents.

"Are you going to drive over the river to save a dime (on beer)?" Seitz says.

He doesn't think so. But he's pretty sure people will ford the river in droves to save $10 on a carton of cigarettes.

Seitz isn't a fan of Taft's ideas about taxes. He would rather just raise sales taxes.

"The general sales tax is more fair," he says. "Everybody pays it. What we're doing instead is picking on the people who smoke cigarettes and picking on the people that drink beer and picking on the people that drink wine and making all these little social judgments. I don't think that's right. Those people -- why single them out? What did they do wrong?"

Some see an element of social engineering to the new taxes. Perhaps lawmakers think higher prices will deter constituents' harmful behaviors. Seitz thinks so.

"Of course the governor would say, 'We're trying to discourage them from making these bad choices,' " he says.

Taft's office says the governor says no such thing.

"This isn't a targeted sin tax," Rickel says. "There are the decisions you make when you're changing a tax system that's been around for decades and no longer reflects the economic climate."

Mallory can't say if proponents intend the tax to curb behavior. He just thinks it's unfair regardless.

"Whether it's by design or by default, if it's affecting disproportionately a single group of people, then you have a problem," he says.

The House passed Taft's budget; it now goes up for Senate approval. The state constitution requires the budget to be signed into law by June 30, Seitz says.

Mallory isn't sure how much support the beer tax enjoys in the Senate. But with libraries and Medicaid on the chopping block, opposition to the beer tax might well be drowned out. ©