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A Hummel Report Investigation

The Tax-Free Spirit

Last summer's tax-free holiday weekend drew thousands of Rhode Island shoppers across the border to Massachusetts. This year Rhode Island lawmakers are considering a tax-free holiday proposal with a twist: five holiday weekends - just for alcohol sales. Jim Hummel talks with the bill's sponsor and one critic who is worried about the potential for more drunk driving fatalities.

SCRIPT

Last summer's tax-free holiday weekend drew hordes of Rhode Island shoppers here to Massachusetts. This year Rhode Island lawmakers are considering their own tax-free holiday, but with a twist - five holiday weekends and just for alcohol.

It's advertising that's tough to ignore. Rhode Islanders can save 7 percent sales tax on alcohol purchases by coming over the border into the Bay State....And many of them are doing just that.

Malik: ``I was down between 10 and 14 percent last year. That's not just myself. That's all the way from Woonsocket down to Tiverton.''
Rep. Jan Malik owns this liquor store in Warren, 2 1/2 miles from the Mass border. He's watched his sales go up, then down as Massachusetts adjusted its sales tax on alcohol over the past few years. Bay State lawmakers put a 6.25 percent tax on alcohol several years ago when it raised the sales tax - then had second thoughts, even though the state pulled in more than a hundred million dollars in revenue.

Malik: ``I guess they heard from the local liquor stores on the New Hampshire border how bad business was for them when they instituted that new tax, because New  Hampshire doesn't have any tax on alcohol.''

So Massachusetts eliminated the tax on alcohol purchased in package stores.

Walaska: ``What's happening to our border stores,  I'm told they're down anywhere from 10 to 30 percent, when Massachusetts went to zero taxes on alcohol.''

Rhode Island Senator William Walaska last month submitted a bill, at the request of a liquor store owner and lobbyist, that would create tax-free sales periods of a week to 10 days surrounding five major holidays:
Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas.

It would apply to package store sales only - and not bars or restaurants.

Walaska: ``So this legislation is just an attempt to put them on an even keel somewhat, at  least on some holidays when there's some significant alcohol sales  so they can recoup some of that revenue.''

Hummel: ``Have you ever seen a bill like this before?''

Abbate: ``Never.''

The bill has caught the attention of Mothers Against Drunk Driving's Executive Director Gabrielle Abbate, who says Rhode Island has already had 10 driving fatalities this year. She said the organization is not anti-alcohol per se or anti-business, but she questions making the sales of alcohol more attractive around periods when people tend to drink more anyway.

Abbate: ``We're unique. I guarantee you we're unique. Is this the trend across the country. So will we have more data to look at? There's no other state that's looking to do this, specific to those holidays the way that bills is written, which in itself is a little bit scary. Because we already have one of the highest incidents of drunk driving fatalities and serious injuries across the country.''

Representative Malik had no role in the proposed legislation and didn't know about the bill until we brought it to his attention.

Malik: ``I mean a bill like this, I just see it as putting a band aid on a problem. That's myself. It's nice to see we're going to be competitive for those five holidays, but what about the rest of the year? I'm not just in business for those  holidays, I'm in business for the whole year. And I honestly think in the state of Rhode Island, if we want to play like a regular state, with the big boys, we should  look at stuff to be competitive with Massachusetts and the neighboring state of Connecticut.''

Hummel: ``Where do you stand personally and what questions would you like to get answered on this?''

Walaska: ``I asked for a fiscal note most  recently and that will tell me what the lost revenue may or may not be for the state of Rhode Island. If we give a tax break on four or five holidays that's going to be some dollars, because that's the most significant sales days in terms of Memorial Day,  4th of July, Christmas, Thanksgiving. So I've got to see just what we're going to lose in revenue regarding taxes. But of course  the other side of the same coin is we're going to bring in revenue, so the 10 to 30 worth of sales that normally wouldn't take place in Rhode Island, will take place in Rhode Island and so liquor stores make money and  they pay taxes on profit, so it's two sides of  the same coin.''

Abbate says it's all about the statistics.

Abbate: ``I remember when people came  and  said can we do Sunday sales? And they were really surprised that our organization didn't come up  screaming and yelling and saying, `Oh my God how can you do that on Sunday?' We did it because the research in the state showed that our alcohol traffic fatalities in the other states had not increased when those state had taken on Sunday sales those deaths and serious injuries had not increased because of Sunday sales. 

We're equating increased consumption levels at a time when we know there are increased incidents of drunk driving. That's what we're concerned about.''

Malik says it's just not alcohol, but lower taxes on gasoline in Massachusetts as well that are hurting Rhode Island businesses near the border.

Malik: ``It all comes down to paying taxes to the government. If  people can find  a way not to pay them, they're not going to pay them.

They're don't care that I'm the local liquor store, or the Woonsocket's store is the local one, if they can save  a buck, plus beat the government, 'cause they already think they pay enough, which they do, they'll do it.''

Senator Walaska agrees.

Walaska: ``I think the larger issue is the sales tax structure in the State of Rhode Island; 7 percent is one of  the highest in the country.

Massachusetts is less, they just raised their, made us more competitive. But in certain areas, we're not competitive. And one is liquor sales.''

Hummel: ``Which do you think would bring in more customers, if you say we're cutting our prices 10 percent on everything, or if they said you can get the alcohol tax free?''

Malik: ``Alcohol tax free. I mean, it's a no brainer.''

Malik also wears another hat in this debate: he is on the House Finance committee, charged with closing the state's seemingly perpetual budget gap. Any tax-free holiday he says, forces some other tough decisions at the General  Assembly.
Malik: ``Over the years of being on (House) Finance when we take money out of  the pot we usually have to find a way to put some money in, where it's going to come from I have no idea.''

Jim Hummel, for the Hummel Report.

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