Failed alcohol tax sets an example for government

Government officials give the same excuse whenever they want to raise taxes. They say the money will go into public works or social services. The desired outcome for tax increases is a measurable benefit to the majority at a small expense to the minority. But then there’s the reality of the situation, which is entirely different from the optimism behind tax hikes.

In 1990, the Florida Legislature passed a 3.3 percent tax on alcoholic beverages sold by the glass in bars and restaurants. According to the Lakeland Ledger, the tax money was supposed to go into a trust fund that supported a program “designed to prevent children and teens from developing substance abuse problems.” As well intended as that sounds, this was not to be the case.

The 21,646 Florida businesses affected by the tax complained. This is not to say it cost the businesses money – they just raised prices on customers to pay for it, as businesses always do.

However, the tax was still a burden due to the amount of time it took to calculate charges on a per-drink basis. It was “an expensive and cumbersome tax to collect,” according to Carol Dover, president of the Florida Restaurant and Lodging Association.

In fact, the tax was so expensive, it cost more to collect than the state would ever see in revenue – a phenomenon in economics addressed by the principle of a Laffer Curve.

In 2004, the Office of Program Policy Analysis and Government Accountability, an independent auditing organization that services the Legislature, recommended to Florida’s state government that the tax should be “repealed or modified.”

On July 1, 2007, according to the Ledger, the tax and the fund it benefited will be canceled. The state of Florida will continue to fund 95 percent of the existing program from other money.

A repeal won’t have much effect on the substance abuse prevention program the tax was originally intended to fund. Of the $50 million in revenue Florida received from the tax, only $12.5 million went to the program. After the tax is repealed, the state of Florida will still be the beneficiary of more alcohol tax money than 48 other states.

Certainly the tax had helpful intentions, but it failed. Frankly, “good intentions” are not a good way to govern. This is not to say that substance abuse prevention programs should not be funded. But they shouldn’t be funded by an organization – in this case, the government – which has a 75 percent overhead cost that taxpayers pay for.

Not to be pretentious, but there are more efficient ways to do things.