Nearly every group affected by Gov. Jack Markell’s proposed budget has expressed its dissatisfaction with where he’d like to make cuts or how deep he thinks they should go.
Between state employees riled by plans to slash salaries, casino bigwigs upset by the possibility of handing more over to the state, and the NCAA and NFL scolding his sports betting scheme, the governor is awash in heated criticism.
But if he wants to stop off for a drink after a long day at Legislative Hall, he’ll likely get even more grief from the bartender.
Tavern owners are appalled by Markell’s plan to raise Delaware’s alcohol taxes by 50% and say that, combined with the slumping economy, it will mean fewer jobs and higher prices.
“If our costs go up, the cost to the consumer goes up, and if the cost to the consumer goes up it affects how much money they’re going to spend when they go out,” said John Leone, owner of Leone’s Loockerman Exchange in Dover.
Leone said he’ll face a tough decision if the tax increases are a part of the final budget the General Assembly passes by June 30.
He could raise his prices to reflect his increased costs, or he could keep his prices the same and take a smaller profit.
“We could do the same volume of business and make less money,” he said.
But Leone’s son and co-owner Jason Leone said the bar isn’t in a position to take a cut, even at the risk of scaring off some customers.
“They raise my price up and I’ve got to raise it, and we look like the mean person,” he said.
Currently, consumers pay 36 cents tax on a case of beer, 19 cents on a bottle of wine and $1.08 on a bottle of hard liquor.
Carrie Leishman, president of the Delaware Restaurant Association, said bar and restaurant owners know the state is hurting, but that the governor has overlooked the effect his plan would have on their small businesses.
“I certainly can understand because Delaware is in rough financial shape, the governor is grasping at any string he can to raise funds,” she said. “But I don’t think they realize the unintended consequences of raising these excise taxes, especially on the small business person. Delaware restaurants are the largest small business employer in the state.”
Leishman said there are more than 2,000 restaurants in the state, and that higher alcohol taxes would likely cause many of them to cut their staffs.
“Right now I could not think of a worse time to raise any type of tax on small business, in a down economy,” she said. “Restaurants have been hit particularly hard in this recession, obviously discretionary income is down, so any decreases in sales due to an excise tax that might have people buying less will greatly effect the restaurant industry.”
But Markell defended his proposal, saying everyone in the state should share the pain.
“There are people who are upset with most parts of my budget, there’s a lot in my budget that I didn’t want to propose,” he said. “It was based on shared sacrifice. There’s a lot that I’m asking in this budget, and in this case I realize there’s an impact on real people, on bar owners, but unfortunately we’re in a difficult situation.”
Markell also argued that some of the state’s liquor taxes haven’t been reset in 20 years, and others have remained unchanged since the 1950s.
The restaurant association has urged its members to lobby the governor and their state representatives heavily, Leishman said, but though that strategy has helped defeat proposed alcohol tax increases in the past it may be tougher to convince lawmakers to hold the line this time.
“I think they think this is an easy fix to the state’s woes,” she said. “But anytime there is an increase in any fee it squeezes those profit margins … the consumer will only pay so much.”
Email Doug Denison at doug.denison@doverpost.com
