By Elisabeth J. Beardsley
FRANKFORT, Ky. — Kentucky's master bourbon distillers told lawmakers yesterday that Gov. Ernie Fletcher's plan to extend the 6 percent sales tax to alcoholic beverages would take customers and jobs away from one of the signature industries.
But legislative leaders from both parties joined Fletcher in saying they favor some level of increased taxation on alcoholic beverages sold at package stores.
Officials from Maker's Mark Distillery, Jim Beam, Wild Turkey and Brown-Forman Corp., which makes Woodford Reserve and Jack Daniel's, appealed to House budget writers to protect a native product.
The distillers said Kentucky already imposes an excise tax of $1.92 per gallon on spirits makers and a 9 percent tax on wholesalers' gross receipts. Adding a 6 percent tax on retail sales would drive Kentucky's bourbon taxes to the highest in the nation, they said.
Maker's Mark President and CEO Bill Samuels Jr., who's planning a $35 million expansion to his Marion County facilities, said he worries that a Kentucky alcohol tax increase would encourage other states.
"It sends the worst signal in the world to the rest of the country," Samuels said. "It really makes us vulnerable to an increased activity at all the other state levels, which shakes the confidence of investors and eventually that backs down to lost jobs, lost interest in investment in the industry."
The Kentucky Malt Beverage Council also opposed the Fletcher proposal, with several border retailers arguing that higher prices would cost them business from out-of-state customers.
Under current law, customers do not pay a sales tax on alcohol sold at package stores, but they do pay a sales tax on alcoholic beverages at restaurants.
Fletcher says it's fair to tax all alcohol the same. His proposal is projected to raise an extra $40.5 million in its first year, according to budget director Brad Cowgill's office. It's part of a multi-pronged tax reform plan that would raise and cut a host of other taxes.
Cowgill acknowledged that customers would pay more for alcohol under Fletcher's proposal, but said the cost would still be less than surrounding states.
The tax increase would not apply to or affect worldwide sales, he said.
"All we're trying to do is to achieve a fair balance," he said.
House Budget Committee Chairman Harry Moberly said political considerations would require some sort of alcohol tax increase to garner support for a cigarette tax increase. "I'd be surprised if there was enough votes to pass the alcohol tax at 6 percent," Moberly, D-Richmond, said. "I would think there'd be more votes to do something less."
Senate President David Williams said he had "no problem" with the alcohol tax.
"I don't think it will impact sales at all," Williams, R-Burkesville, said. "I believe that if anyone buys enough beer or liquor that a 6 percent sales tax would impact their lifestyle, that they need to consider how much beer or liquor they're drinking."