The problem is “Maryland spirits consumers are forced to pay much higher taxes for a spirits-based RTD product even if the product has the exact same or similar amount of alcohol as an RTD made with malt, sugar or wine,” said Jay Hibbard, senior vp-state government relations, Distilled Spirits Council of the U.S.
Under the proposed bill, the tax rate on spirits-based RTDs would be reduced from the current rate of $1.50/gallon to $0.40/gallon.
Hibbard stated that the excessive tax burden on spirits producers is a steep hurdle for Maryland distillers trying to enter this growing category. According to a 2021 DISCUS survey of craft distillers, 62 percent of those not currently producing RTD products cited the higher tax rate as a barrier to entering the market.
Hibbard also noted the Maryland Department of Health’s definition of alcohol clearly states that a 12-ounce bottle of beer or wine cooler, a 5-ounce glass of wine or 1.5 ounces of 80-proof distilled spirits all contain the same amount of alcohol.
“To suggest by statement or policy that some forms of alcohol are ‘softer’ than others sends a dangerous message when science has long recognized that standard servings of distilled spirits, beer and wine contain the same amount of alcohol,” Hibbard said. “This is a critical aspect of responsible consumption.”
Maryland is one of many states taking a closer look at this issue to ensure that producers of spirits-based RTDs are being taxed fairly and that consumers have equal access to these products in the marketplace. Twenty-four states already have lower tax rates for lower-abv spirits-based products. In fact, last year bills to reduce the state excise tax on spirits-based RTDs passed in Michigan and Nebraska.
Hibbard completed his testimony by stating, “There is no public policy rationale for maintaining policies that stifle innovation and prevent competition. In fact, we think policies should foster both innovation and competition, and then let consumers decide.”