Repeal of tax on liquor debated

Ballot Question 1 would remove the sales tax on retail sales of beer, wine, and liquor that the state adopted as part of the fiscal 2010 budget. The sales tax was increased from 5 percent to 6.25 percent in fiscal 2010.

John Harrington, owner of Harrington Wine and Liquors in Chelmsford, strongly favors the ballot question, citing the negative impact he said the tax has had on package stores.

“Our gripe is we are sending people to New Hampshire,’’ which has no sales tax, he said. “It’s hurting my colleagues and us in this part of the state, and it trickles down to other parts of the state.’’

Harrington said it was also unfair to charge a sales tax on alcohol because the state already has an alcohol excise tax. The excise tax is paid by wholesalers, who incorporate it into the prices they charge retailers.

But Kevin Norton, CEO of CAB Health and Recovery Services, strongly opposes the proposal.

Norton, whose Peabody-based agency provides a range of drug and alcohol treatment services, said that numerous studies have shown that if it leads to an increase in prices, a tax on alcohol “ends up a deterrent to underage drinking.’’

He also warned that eliminating the tax would lead to a loss of funding for drug and alcohol treatment programs. The fiscal 2011 budget directed that revenues generated from the sales tax on alcohol — estimated at $110 million this fiscal year — be used to fund substance abuse programs.

“In Massachusetts, we have a drug addiction epidemic,’’ Norton said. “And if these dollars go away, treatment services will be dramatically reduced.’’

Norton said he did not believe alcohol should qualify for an exemption from the sales tax because “it’s not a necessity like clothes or prescription drugs,’’ which are exempt.

P.J. Foster, spokeswoman for the statewide committee supporting the ballot question — whose members include the Massachusetts Package Stores Association — said the sales tax is “hurting small business and it’s hurting consumers.’’

“Because of the tax, consumers are extremely price-conscious so they are buying less and buying cheaper brands.’’ As a result, “businesses are hurting,’’ she said.

Foster also called the sales tax on alcohol “a tax on top of an existing tax,’’ referring to the excise tax.

Vic DiGravio, cochairman of the statewide committee opposing Ballot Question 1, countered that Massachusetts is “one of 46 states that have both a sales tax on alcohol and an excise tax. To say that this is outrageous or onerous tax policy is just not true.’’

According to DiGravio, figures from the state Department of Revenue indicate the tax has not had a noticeable impact on statewide alcohol sales.

Robert Bliss, a spokesman for the Revenue Department, said the sales tax generated $33.2 million in the first three months of the current fiscal year, which he said was about $4 million above agency projections.

David Brennan, owner of South Peabody Liquors and Cosgrove Liquors in Salem, said he has seen his business fall since the tax took effect, particularly on weekends when residents have more time to drive to New Hampshire.

“I get complaints every day from my customers about paying the extra money,’’ he said.

Marilyn Belmonte, chairwoman of the Burlington Drug and Alcohol Task Force, said she strongly opposes the ballot measure, in part because she sees higher prices for alcohol a deterrent to underage drinking.

“Studies have shown that teenagers are more sensitive to price than adults,’’ said Belmonte, who also worries that loss of the tax revenue “is going to hamper prevention and treatment services.’’

State Representative Brad Hill, an Ipswich Republican who supports the ballot measure, said, “I don’t believe we need to put in an additional tax to pay for these programs,’’ arguing the money could be found elsewhere in the state budget.

Hill also favors repealing the tax because it “has hurt many small businesses in my district.’’

The North Shore Alliance for Economic Development, a nonprofit composed of business representatives, municipal leaders, and state legislators, has taken a stance against Question 1, according to its executive director, Bill Luster.

“Removing $110 million from the revenue stream at this time would be difficult to absorb,’’ Luster said. Noting that the money is directed toward addictive services, he said finding alternative funding in the budget for those programs would be “very, very challenging.’’