Posted on: Sunday, March 6, 2005

Change in booze taxes sought

By Derrick DePledge
Advertiser Capitol Bureau

The Distilled Spirits Council of the United States wants Hawai'i to tax drinks mixed with vodka or tequila the same as drinks blended with wine or beer, arguing that spirits-based coolers are at a marketing disadvantage because of higher taxes.

The state House is considering a bill that would lower the tax on spirits-based coolers from $5.98 per gallon to 85 cents per gallon, a move the spirits industry predicts will lead to a nearly threefold increase in sales across the Islands.

Beer and wine interests are against the bill as an unwarranted tax break for spirits. The state Department of Taxation opposes the bill because it could cost the state an estimated $1 million annually in lost tax revenue.

"It's a matter of fairness," said Jon Okudara, a lobbyist representing the Distilled Spirits Council, adding that all cooler drinks would have a limit of 7 percent alcohol.

Some lawmakers believe young people may be more likely to try sweetened, spirits-based coolers if they were sold at lower prices because of the tax break. Rep. Cynthia Thielen, R-50th (Kailua, Mokapu), said the tax break would send the wrong message at a time when the state is trying to reduce underage drinking.

"I look at it like the flavored cigarettes. It's aimed at the kids," Thielen said. "It's getting them hooked on hard liquor."

Rep. Jon Karamatsu, D-41st (Waipahu, Village Park, Waikele), who introduced the bill, said cooler drinks are similar to other drinks and should be taxed the same. "Part of my goal is to make it fair for all businesses," he said.

The bill would delete references to wine and malt beverages in the state's definition of "cooler" and instead define the drinks as any liquor that contains less than 7 percent alcohol and is mixed with fruit juices, water or other flavors. The bill, which passed the House Finance Committee, could come up for a vote before the House on Tuesday.

Tim Lyons, a lobbyist for Anheuser Busch, said the tax break could have an effect on what is a very competitive market. "We just see this as a drastic lowering of their tax," he said.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com or 525-8070.