HONOLULU — State Rep. Kaniela Ing wants to reduce the state tax on beer by half, a proposal he says is a matter of “class fairness.”
In a news release Tuesday, Ing (D, South Maui) announced he will introduce a bill next year that would cut the beer tax on Hawaii residents and tourists to 42 cents a gallon from 93 cents.
Ing said he rarely drinks himself and is not trying to encourage others to drink. His goal “is to level out the taxes so that each type of alcoholic beverage is taxed equitably,” he said in his statement.
“Working people tend to drink beer more often than other types of alcoholic beverages. But today they are taxed more per ounce of alcohol than someone drinking wine. When you look at it that way, the current system is incredibly unjust,” Ing said in his statement.
Ing’s proposal runs contrary to a package of draft proposals submitted by PFM Group Consulting, which was hired by the state Tax Review Commission to recommend changes in the state’s tax code.
PFM has suggested in its draft report that Hawaii increase state taxes on beer, wine and spirits by 10 percent to raise an extra $5 million a year for the state general fund.
The consultant noted that while liquor taxes are regressive — meaning they are more of a burden on lower-income residents than on the wealthy — tourists help to pay those taxes, which helps to export some of Hawaii’s tax burden.
The Tax Review Commission is expected to vote later this year on which of the PFM proposals it will recommend to state lawmakers.
Tom Yamachika, president of the Tax Foundation of Hawaii, agreed that alcohol taxes are regressive and that a reduction in the beer tax “is certainly something to be considered.”
Ing said in an interview his proposal grew out of the debate this summer over the extension of the general excise tax surcharge to support the Honolulu rail project. That tax is regressive, and Ing said he and his staff have been looking for ways to ease the tax burden on the working and middle classes.
Ideally, the state would make the excise tax less regressive, but that tax is the largest single source of funding for the general fund, and dramatic changes to that tax seem unlikely to pass, Ing said.
“We’re looking at things that are more low-hanging fruit, impacts that we can make that will make the tax system less regressive, and came across this,” he said. Ing said he does not know yet how much reducing the beer tax would cost the state.
There is some disagreement over how Hawaii’s beer tax compares with that of other states. Ing said the Hawaii beer tax is second highest in the nation based on data he received from an organization of local breweries, while PFM said Hawaii’s beer tax is third highest.
The Tax Foundation calculates the Hawaii beer tax is fifth highest in the nation.
In any event, Ing said he believes his proposal to slash the tax rate on beer makes sense from a business standpoint.
“Hawaii’s beer industry is growing and has resulted in hundreds of new jobs, diversified tourism and a stronger economy,” he said. “If you look at other states, this local industry has a lot of room to grow. We should encourage the growth of local business to allow them to compete in the national marketplace.”