Legislation on beverages nearly dead for the session

At the Legislature, one tax on beverages is dead, while another is on death’s door.

Earlier this year, lawmakers introduced several bills that would impose taxes on certain beverages in an effort to generate more revenue for a state economy still reeling from the COVID-19 pandemic. Those bills included two that proposed a tax on sugary drinks and one calling for an increase to the state’s liquor tax.

The liquor tax bill is still technically active, but it only has until March 5 to pass its final committee — meaning it only has two working days to do so, thanks to a five-day recess that begins Thursday.

The sugary drinks bills have both failed to progress since January, and have therefore missed essential deadlines and can be considered dead.

The sugary drinks bills proposed a 2-cent tax on each fluid ounce of all sugar-sweetened beverages sold in the state — which includes non-diet sodas, and many juice and tea beverages. Under this policy, a 12-pack of 12-ounce soda cans would cost an additional $2.88.

Meanwhile, the liquor bill did not explicitly state how much the additional tax surcharge should be, but it mentioned that a hypothetical 5-cent surcharge per 1.5 ounces of distilled spirits, 5 ounces of wine and 10 ounces of beer would generate $32 million in revenue, while a 10-cent surcharge would generate more than $62 million.

Both proposals also cited the negative health effects of overindulging in sugary drinks and liquor, and suggested that increasing taxes on the beverages could lead to a decrease in their consumption.

Neither proposal was popular among restaurant owners, who would bear the brunt of both taxes and are under considerable financial strain thanks to the pandemic.

The sugary drinks bills never progressed far enough to be the subject of a hearing, but the liquor tax bill was roundly opposed at a hearing on Feb. 10.

“This proposed tax surcharge hurts small independent manufacturers of liquor most,” wrote Thomas Kerns, owner and brewmaster at Big Island Brewhaus in Waimea. “Heavy drinking and the problems caused by chronic alcoholism will not be solved by increasing tax rates on alcohol. A tax surcharge on liquor will drive consumers to substitute lower priced brands rather than stopping excessive consumption, hurting small independent craft beer manufacturers and small liquor brands the most.”

However, the bill had its supporters. Most of the testimony supporting the bill was from the perspective of those hoping to curb the problems associated with heavy drinking, such as drunken driving, unplanned pregnancies, fetal alcohol syndrome and more.

“Alcohol consumption and heavy drinking has increased during the pandemic and will likely remain high post-pandemic,” read a form letter that was submitted by dozens of individuals. “Excessive alcohol consumption costs money and lives to our community. Alcohol use does not pay for itself. According to the (U.S. Centers for Disease Control and Prevention), the consequences of excessive alcohol cost the state nearly one billion dollars per year.”

Victor Lim, legislative lead for the Hawaii Restaurant Association, said he is optimistic that the bill will go no further this year. However, he added that the bill never made sense, because it was proposed with the economy in the doldrums, placing additional pressure on already-struggling businesses and passing costs to consumers with no disposable money.

Pam Owens, co-owner of Pineapples Restaurant in Hilo, was surprised and disappointed to hear about the liquor tax proposal.

“I just don’t think it’s the right time for something like this,” Owens told the Tribune-Herald. “The hospitality industry is still struggling with COVID-19, and we’re not seeing the same amount of business as we were before. We may never see the same numbers.”

Owens said that the tax hike would make more sense if it was passed after Hawaii’s economy recovers from the pandemic.

Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.