Gov. Granholm has proposed a 15 percent increase on the cost of liquor in Michigan by raising the state's markup. The cost of a bottle of liquor sold in Michigan is arrived at by adding together the amounts that go to the distiller and importer (32 percent), the licensee who actually sells the liquor (15 percent) and the state government (53 percent).
As soon as a bottle of liquor arrives in Michigan, the state government tacks on a 65 percent markup fee. The state also adds on liquor taxes and sales tax to the price. So even though the state does not produce, store, distribute or sell liquor, it already collects more than $250 million each year in liquor taxes and markup fees. Now, Gov. Granholm has proposed raising the markup fee to a whopping 75 percent.
Michiganders already pay almost four times more in liquor taxes than their neighbors in Indiana. That's why approximately 4.5 million bottles of spirit sales are lost each year as people cross the border to save money.
With the proposed increase, taxes and mark-up fees on liquor in Michigan that currently total $10.53 will increase to $14.40 per gallon. We will be making a bad situation worse by widening the gap between Michigan's liquor taxes and those of surrounding states ($2.68 in Indiana, $3.25 in Wisconsin, $4.50 in Illinois and $8.40 in Ohio).
Raising taxes or mark-up fees means raising prices. Michigan retailers already are suffering with cross-border sales. It's a bad business decision to increase prices when you are already losing sales to competitors.
Of the top 20 liquor products sold in Michigan, the price in Michigan is higher than the national average 80 percent of the time. For example, a bottle of Bacardi rum will cost you $24.83 in Michigan, but only $20.72 in Indiana. Similarly, a bottle of Popov vodka that sells for $16.03 in Michigan can be had for $11.68 in Indiana.
Bootlegging of liquor from other states by organized smuggling rings also is costing Michigan tens of millions of dollars per year in lost tax revenues. Increasing Michigan's liquor taxes just gives these criminals one more reason to cheat the state and put our businesses, jobs and economy at further risk.
Recently, a smuggler was arrested in Macomb County after police discovered he was bringing in van loads of liquor for sale on street corners.
The Michigan Liquor Control Commission and many Michigan distributors also have started a program where specialized labels are being used to alert police to bottles being sold without proper Michigan taxation. This is a growing problem and the governor and state Legislature should be finding ways to help, not provide incentives for the criminals to make a larger profit.
This is a risky and unnecessary proposal that endangers the strength of several promising industries as well as the jobs they offer. There are so many jobs being lost in this troubled economy, why add the liquor, hospitality, tourism and retail industries to that list?
About the author
George Zrinyi is president of the Michigan Liquor Vendors
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