Upcoming nationwide price increases on liquor may soon send consumer spirits plummeting.
On Oct. 1, the federal excise tax on distilled spirits will jump 19 percent, leading to what some liquor-store owners predict will be "dramatic increases" in the retail prices of hard liquor, brandies and cordials. Beer and wine are exempt from the tax hike.
Liquor dealers in the Washington area and across the country are using the tax increase -- the first in 34 years -- to encourage consumers to buy now, not later. Their appeals have special urgency because retailers themselves will be taxed on the inventory that is on their shelves when the hike takes effect.
"This is an opportunity for shoppers to get a jump on their spirits purchases for holiday entertaining and gift giving," said F. A. Meister, president of the Distilled Spirits Council of the United States Inc., the trade association representing liquor manufacturers and marketers. "While price increases are inevitable . . . , consumers should be aware of this early opportunity for savings."
The tax increase probably will mean higher prices for mixed drinks at bars and restaurants, the assocation said, adding, however, that the increase should be relatively slight.
"You're talking about increases of $1 to $2 a bottle on the most popular spirits," said Aaron Bernstein, vice president of Calvert Woodley Discount Wines and Liquors on Connecticut Avenue NW.
Jerome Winters, owner of Chevy Chase Wine & Liquor, said he expects increases of $1 to $3 per bottle on this area's best-selling size of distilled spirits: 1.75 liter, or 59.2 ounces. Winters' store ran a newspaper ad last week reminding consumers that only "12 shopping days [are] left until the new U.S. federal excise tax starts. . . ."
Prices may drop in a few months, Winters conceded. "But, they'll never be at these levels again," he added.
The sales pitches are proving effective, and some celebrators are buying now for the holidays and other festive occasions.
Joseph Sellers and Laurie Davis, two Washington attorneys, are purchasing all of the liquor now for their Thanksgiving wedding. "On such a happy occasion, I'm sorry to have learned that our spirits aren't the only ones that will be high," Sellers said.
Business has picked up at The Cork Club stores, which include Chevy Chase Wine & Liquor, Continental Wine & Liquor at Vermont Avenue and L Street NW, and Eagle Wine and Cheese in Georgetown. The stores are owned separately but are affiliated for advertising purposes.
"I would say The Cork Club stores have seen about a 10 percent increase in business," said Winters of Chevy Chase Wine & Liquor.
To prevent stores from stockpiling liquor in advance of the tax increase (and then pocketing a healthy profit when they raise prices next week), larger retailers will be required to pay a one-time "floor" tax of $2.00 per 100-proof gallon on all stock on hand Oct. 1. The Distilled Spirits Council said it expects many retailers to offer special sales and promotions to reduce inventory before the increase.
Bacardi Imports Inc. in Miami, for example, is running newspaper advertisements urging consumers to "buy now and beat the tax, plus get $1.50 refund on Bacardi rum."
The tax increase on liquor was enacted last year, after members of Congress from tobacco states, including Sen. Jesse Helms (R-N.C.), sought to cut the excise tax on cigarettes from 16 cents a pack to 8 cents, according to a staffer on the House Ways and Means Committee, which has jurisdiction over tax matters.
(The cigarette tax has not been cut; in fact, the Senate Finance Committee voted Friday to freeze it at 16 cents a pack.)
To make up for the revenue that was expected to be lost from the tax on cigarettes, Congress voted last year to raise the federal tax on distilled spirits -- the first such increase on that industry since 1951. It caught the alcohol industry by surprise and angered makers and marketers of distilled spirits, who are particularly incensed that the tax is targeted at them only and not the beer and wine industries, whose last federal tax hike also came in 1951.
"It is clearly discriminatory to hit us alone," said Duncan H. Cameron, spokesman for the Distilled Spirits Council. "Congress shouldn't be picking victims from among equally legal and comparable products and trying to redirect consumer choices through taxes." When the increase goes into effect, federal taxes on an average mixed-drink or cocktail will be four times the amount of tax on a can of beer and 18 times the tax on a five-ounce glass of table wine, even though all three contain the same amount of alcohol, Cameron said.
Not everybody is unhappy about the increase, however. The National Alcohol Tax Coalition, a public-interest group, contends that higher federal taxes on alcohol could cut the budget deficit by $12 billion a year and reduce alcohol-related health problems and accidents. Alcohol costs the nation $120 billion a year in lost productivity, health care, law enforcement and property damage, the coalition said at a press conference Wednesday.
"Higher alcohol taxes will reduce heavy drinking and should be considered a cornerstone of a comprehensive, cost-effective public-health strategy to lessen alcohol-related problems," said Dan Beauchamp, a professor of health policy and administration at the University of North Carolina and a member of the coalition.