SB 2456: Taxation; Alcohol; Liquor Tax

A BILL FOR AN ACT

relating to the taxation of liquor.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that alcohol consumption contributes to hundreds of deaths each year in the State.  According to the United States Centers for Disease Control and Prevention, there was an average of three hundred forty-nine alcohol attributable deaths per year in Hawaiʻi between 2011 to 2015.  Of those deaths, approximately ninety per cent were due to excessive alcohol use, which includes binge drinking, heavy drinking, and any drinking by pregnant women or people under the age of twenty-one.  It is estimated that excessive alcohol use shortened the lives of those who died in Hawaiʻi by an average of 27.2 years.

     The legislature further finds that, although it is often assumed that most excessive drinkers are alcohol dependent, one study found that ninety per cent of excessive drinkers did not meet the criteria for alcohol dependence.  The most common form of excessive alcohol use is binge drinking, which is defined as consuming four or more drinks during a single occasion for women and five or more drinks during a single occasion for men.  Heavy drinking is defined as consuming eight or more drinks per week for women and fifteen or more drinks per week for men.

     The legislature additionally finds that there are several short and long-term health risks associated with excessive alcohol use.  The immediate health risks of excessive alcohol use may include injuries, such as motor vehicle crashes, falls, drownings, and burns; violence, including homicide, suicide, sexual assault, and intimate partner violence; alcohol poisoning; and sexual behaviors that can result in unintended pregnancy or sexually transmitted diseases.  For pregnant women, excessive alcohol use may result in miscarriage and stillbirth and any alcohol use during pregnancy may cause fetal alcohol spectrum disorder.  Over time, excessive alcohol use can cause chronic diseases and other serious problems including high blood pressure, heart disease, stroke, liver disease, digestive problems, certain types of cancer, a weakening of the immune system, learning and memory problems, mental health problems, social problems, and alcohol use disorders or alcohol dependence.

     In addition to the health risks associated with excessive alcohol use, the legislature notes that excessive alcohol use contributes to significant economic costs to the State, including health care, lost productivity, and criminal justice costs.  According to a 2010 study, the estimated total cost of excessive alcohol use in Hawaiʻi was $937,400,000 or $1.58 per drink, with the state government paying 39.4 per cent of these costs, which translates to $369,200,000 or $0.62 per drink.  One approach to influencing alcohol consumption in the State was examined in a 2022 white paper by the university of Hawaiʻi at Mānoa Pacific Health Analytics Collaborative.  The research found that increasing the liquor tax by a mere ten cents per drink could save lives and also raise $58,000,000 or more in tax revenue.  The tax increase would also lead to a 6.9 per cent decrease in alcohol consumption among adults, seven per cent reduction in alcohol use disorders, and an increase in economic productivity by an additional $5,900,000.

     Correspondingly, the legislature finds that the last time the State increased the tax on liquor was in 1998.  Costs have increased over the past twenty-eight years and leaving the tax on liquor unchanged has had the practical effect of reducing the tax.  Thus, it is necessary to adjust the liquor tax to reflect the true tax rate in today's dollars.  A reliable source is the United States government's Consumer Price Index, or CPI, which measures the average price changes for commonly purchased goods and services in the U.S. economy.  According to the CPI, today's prices are 1.98 times as high as average prices in 1998.  Alternatively, one dollar today only buys approximately fifty per cent of what it could buy back in 1998.  Any additional state revenue collected from the inflation adjustment in the liquor tax will be deposited into the general fund and can be used for the prevention and treatment of alcohol-related disorders such as substance use dependence, health care services, mental health services, and fetal alcohol spectrum disorders.

     Accordingly, the purpose of this Act is to adjust the liquor tax for inflation.

     SECTION 2.  Section 244D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every person who sells or uses any liquor in the State not taxable under this chapter, in respect of the transaction by which the person or the person's vendor acquired the liquor, shall pay a gallonage tax that is hereby imposed at the following rates for the various liquor categories defined in section 244D-1:

     On July 1, [1998,] 2026, and thereafter, the tax rate shall be:

     (1)  [$5.98] $11.84 per wine gallon on distilled spirits;

     (2)  [$2.12] $4.20 per wine gallon on sparkling wine;

     (3)  [$1.38] $2.73 per wine gallon on still wine;

     (4)  [$0.85] $1.68 per wine gallon on cooler beverages;

     (5)  [$0.93] $1.84 per wine gallon on beer other than draft beer; and

     (6)  [$0.54] $1.07 per wine gallon on draft beer;

and at a proportionate rate for any other quantity so sold or used.

     Beginning July 1, 2027, and every year thereafter, the gallonage tax that is imposed pursuant to this section for the various liquor categories shall be adjusted using the Consumer Price Index for All Urban Consumers (CPI-U) for Honolulu, or a successor index, for the twelve months prior."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2026.

Report Title:

Taxation; Alcohol; Liquor Tax

Description:

Increases the liquor tax and adjusts it for future inflation.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.