INDIANAPOLIS — A few extra pennies on a six-pack of beer could help Indiana counties afford addiction and mental health programs for low-level offenders, keeping them out of prison, in line with a law that goes into effect in July.
But the idea — floated by a group of prosecutors, public defenders, judges, police and prison officials — may fall flat in an election year when lawmakers loathe anything that whiffs of a tax increase, no matter how small.
“The general flavor of a tax increase prior to an election has little appeal and would meet with skepticism from both sides of the aisle,” Rep. Tim Brown, R-Crawfordsville, chair of the House Ways & Means Committee, said.
Brown should know. A few years ago he proposed raising the alcohol tax by a few pennies to offset cuts in Medicaid payments to doctors and hospitals that treat the poor. His idea went nowhere, killed by opposition from the alcohol lobby and cries of unfairness from interest groups who wanted a cut of the revenues.
“It’s a lot more complicated than just saying, ‘We’ll put a nickel on alcohol and it all go to treatment,’” Brown said.
Indiana has some of the lowest alcohol taxes in the nation, according to the non-profit Tax Foundation. The beer tax is 12 cents per gallon, or about 7 cents on a six-pack. The liquor tax is $2.68 per gallon, and wine is 47 cents per gallon.
The alcohol taxes, mainly collected at the wholesale level, haven’t been raised since 1981.
That’s why a task force of criminal justice officials, appointed by a legislative committee, thinks a tax increase is worth discussing.
The group’s job over the past few months has been to raise ideas for how to reduce costs associated with the rewritten criminal code, scheduled to take effect July 1.
Local officials criticize the law as an unfunded mandate. It’s designed to encourage judges to sentence low-level offenders, whose crimes are often driven by addiction or mental illness, into community-based programs. But it came with no funding for those programs.
The working group — which includes the Indiana Prosecuting Attorneys Council, the Indiana Public Defender Council, the Sheriffs Association and the Indiana Department of Correction — found few treatment programs currently exist, especially for the poor.
Dave Powell of the prosecutors’ group and Larry Landis of the public defender council disagree on the impact of the criminal code reform; Powell worries some parts are too lenient, while Landis thinks some are too tough. But both agree that the law will fail if there’s no funding for local treatment programs that are at the heart of reducing recidivism.
The working group estimates a one-penny increase on the beer tax would raise $30 million in additional revenue. A nickel increase would raise $150 million.
The combined taxes on beer, wine, and hard alcohol now raise about $45 million a year in revenue. Of that, only 7 percent is set aside by the state to pay for mental health and addiction services. The rest is divvied up among the pension fund, a prison-building fund, and the state’s general fund.
Republican state Rep. Greg Steuerwald of Avon did much of the heavy lifting on reforming the criminal code and chaired the working group. He’s promised local officials that the law won’t shift costs from the state to the counties, as the Sheriffs Association and others fear.
But that means convincing legislators to come up with funding for locals to implement the law. One idea he’d like to consider, if the legislators are averse to raising the alcohol tax, is re-directing more of the current alcohol tax revenue into funding local treatment programs.
“I’ve come to the belief, based on best-practices evidence, that if we want to drastically reduce the crime rate and recidivism, we’ve got to provide local communities with the proper funding,” Steuerwald said.
It’s a tough assignment. The 2014 legislative session not only comes during an election year, but it comes during an off-budget year. The state’s biennial budget, which runs till June 2015, was locked into place in April 2013.
Senate Appropriations Chairman Luke Kenley said it would be tough to re-open the budget to raise or re-direct taxes. One reason is the historically unbudgetable alcohol tax itself.
Kenley took his own shot at raising the alcohol tax back in 2009, but his proposal to raise a penny on a bottle of beer went nowhere. One case made by opponents: Adding a penny of tax to the price of a beer may not seem like much, but bars that now charge $3 for a beer are more likely to charge $3.25 with a new tax. That fired up beer drinkers.
But Kenley also said the impact of the new criminal code law is still unknown since it’s yet to go into effect. He points to conflicting reports released earlier this year. One said the law will boost the costs to counties if judges divert more offenders into local programs; another said state prisons will bear the initial increase because judges will be reluctant to send offenders into treatment programs rather than jails.
“The alcohol tax may be a potential new revenue source at some point,” Kenley said. “But we have some bigger questions about the fiscal impact of the (criminal code) law that still need to be answered.”
By the numbers Beverage Tax Per Gallon Beer, flavored malt beverage, hard cider -- $0.115 Liquor, wine -- 21 percent or more alcohol $2.68 Wine -- less than 21 percent alcohol $0.47 Mixed beverages -- 15 percent or less alcohol $0.47 Malt $0.05 SALES IN GALLONS: Beer Liquor Wine FY 2009 127,076,043 9,902,448 9,164,814 FY 2010 124,167,608 9,277,250 10,065,131 FY 2011 124,537,930 9,462,475 11,279,964 FY 2012 120,471,155 9,579,206 11,305,059 FY 2013 117,226,081 10,431,703 11,468,804 REVENUE FROM ALCOHOL SALES TAX: FY 2009 $43,497,941 FY 2010 $40,134,262 FY 2011 $43,494,194 FY 2012 $44,154,161 FY 2013 $45,600,156 HOW THE ALCOHOL SALES TAX IS DISTRIBUTED: State General Fund: $16,846,161 Post-War Construction Fund: (Post War Construction Fund is used for the construction of state-run prisons and schools): $18,943,123 Enforcement & Administration: $2,394,326 Pension Relief Fund: $3,452,724 Addiction Services Fund: $3,061,083 BEER TAX: (shows what tax is on a six-pack of beer and where we rank) Indiana: 7 cents per 6 pack, ranks 42nd Illinois: 13 cents per 6 pack, ranks 27th Kentucky: 43 cents per 6 pack, ranks 7th Michigan 11 cents per 6 pack, ranks 28th Ohio 10 cents per 6 pack, ranks 33rd Source: Indiana Department of Revenue