TRENTON, NJ – A coalition of local hospitality leaders today urged New Jersey Governor Jon Corzine to honor his campaign promise to protect workers by removing a job-killing alcohol tax increase from the state’s budget proposal – an increase that will destroy over 1,000 jobs across the state hospitality sector, the leaders wrote.
“Here’s an opportunity to save a thousand jobs in New Jersey’s hard-hit hospitality industry,” said Fred Leighton, President of the New Jersey Liquor Stores Alliance, who noted that over 11,000 state hospitality jobs have already been lost over the past year due to the recession. “Governor, do the right thing.”
A recent economic analysis showed that increasing New Jersey’s excise tax on spirits and wine by 25% (from $4.40 to $5.50/gallon for spirits and from $0.70 to $0.875/gallon on wine) would cause local retailers to lose an estimated $60 million in retail sales and shed 1,000 hospitality sector jobs as a result.
From the letter:
“Governor, you campaigned on the issue of creating jobs for New Jersey, but in fact this proposal will have the opposite effect for a local hospitality industry that has been pummeled by the recession. By vetoing this misguided proposal you can help over one thousand state residents who will surely lose their jobs if this becomes law.”
The letter is signed by representatives of the New Jersey Restaurant Association, the New Jersey Liquor Stores Alliance, the New Jersey Licensed Beverage Association, the Distilled Spirits Council of the United States, the Wine Institute and the Black Prince Distillery in Clifton, New Jersey.
Full letter below.
June 23, 2009
The Honorable Jon Corzine
State of New Jersey
125 West State Street
Trenton, NJ 086259
Dear Governor Corzine:
We are writing on behalf of a united New Jersey hospitality industry to strongly urge you to remove the proposed increase in beverage alcohol taxes currently under consideration in the New Jersey state budget for the fiscal year beginning July 1, 2009.
Governor, you campaigned on the issue of creating jobs for New Jersey, but in fact this proposal will have the opposite effect for a local hospitality industry that has been pummeled by the recession. By vetoing this misguided proposal you can help over one thousand state residents who will surely lose their jobs if this becomes law. In light of the substantial increase in collections from the tax amnesty program, you are presented with an opportunity to make a change that will have a dramatic and positive impact in supporting an industry that has been devastated in the current economic downturn.
Imposing an increase in New Jersey’s excise tax on spirits and wine at this time would have numerous negative effects:
• The impact of these increases on New Jersey’s employment base will be devastating. This proposal would cause the loss of an estimated 1,000 jobs in the state, many within the hospitality industry which has already lost over 11,000 jobs in the last year alone. This projection is consistent with New Jersey’s experience following its last excise tax increase in 1992. By contrast, in 1997, the State of Delaware cut the spirits excise tax rate resulting in a sales jump of nearly 13% and it has steadily grown at a rate of 4.3% annually. This allowed Delaware to grow its economy and in the process generate new Gross Receipts Tax revenues and more importantly, new jobs.
• A tax increase will substantially diminish New Jersey’s competitive advantage over border states New York and Pennsylvania, directly resulting in lower sales of alcoholic beverages. Elimination of the competitive advantage New Jersey retailers enjoy compared to those states will result in the loss of $36 million in retail sales by New Jersey businesses.
• An excise tax increase will naturally cause New Jerseyans to buy less of something that is more expensive. These lost spirits and wine sales would cost would cost New Jersey retailers to lose an additional $50 million.
• Lower sales from border states and the decline from in-state sales translates into lower excise tax, sales tax and corporate income tax for suppliers, wholesalers and retailers as well as lower W-2 wages for NJ employees.
• Based on our economic modeling, considered among the most reliable in the country, a 25% increase in the current rate of taxation will NOT yield the anticipated revenue of $22 million.
• Further, under this proposal, the Gross State Product is expected to be reduced by $86 million.
• The majority of liquor stores, restaurants and taverns in New Jersey are “small businesses” that are already struggling in a tough economy. The proposed tax increase will increase the number of small business failures in the State. This will lead to a loss of state based businesses and employers as well as an increase the number of people collecting unemployment benefits at an additional expense to the State.
• The current tax burden on beverage alcohol is already so high that Federal, State and local governments collect over $2 in taxes for every $1 that the industry (suppliers, wholesalers, retailers and restaurants) earn in profit. Government is an unequal partner in the beverage alcohol business.
A short while ago, New Jersey Treasurer David Rousseau stated that spirits and wine were being targeted for increased taxes because beer is consumed by the “middle and lower class.” This is faulty economic stereotyping not based on actual research. The fact is that spirits, beer and wine consumers are all drawn from roughly the same income cohorts. We believe it is inappropriate public policy to punish middle-class or lower-income individuals who might prefer a cocktail or glass of wine. This is tantamount to the state using public tax policy to pick market place winners and losers.
As you know, excise taxes are known to be the most regressive form of taxation, impacting persons of lower income far more than the wealthy. When spirits, wine or beer taxes are raised, it is the working poor who are most affected – regardless of the beverage they chose to drink.
In closing, for all the reasons cited above we would again urge you to reject any increase in beverage alcohol taxes.
New Jersey Liquor Stores Alliance
New Jersey Restaurant Association
New Jersey Licensed Beverage Association
Distilled Spirits Council
Black Prince Distillery