Legislation includes increase in alcohol tax to 10%

A legislative proposal that would incentivize health care providers to set up or extend services in poor and rural communities using funds generated from an increase in the alcohol sales tax has been endorsed by dozens of nonprofit and civic groups — including the state’s largest medical system.

Johns Hopkins officials endorsed the Health Equity Resource Communities Act at a virtual news conference Friday attended by a slate of Maryland lawmakers and executives, including state Attorney General Brian Frosh and Baltimore Mayor Brandon Scott. Johns Hopkins University President Ronald J. Daniels and Hopkins Medicine President Kevin W. Sowers said the bill would reduce the devastating health disparities apparent in low-income communities and communities of color.

“We have seen, too often, how geographic determinants prevent many from thriving,” Daniels said. “Addressing these inequities is not only possible, but feasible.”

Sponsored by Maryland Sen. Antonio Hayes, Del. Erek L. Barron and Del. Jazz Lewis, the bill would enable state officials to designate certain areas of the state as equity zones, qualifying them for tax credits, grants and health care provider loan repayment assistance.

It would be funded by a 1 percentage point increase in the state’s alcohol tax, boosting it to 10% from 9%.

Barron, a Democrat from Prince George’s County, said he expects the tax increase will pose a hurdle to the bill’s passage, given the strength of Maryland’s alcohol lobby. But the legislative sponsors are prepared to argue that the tax hike will save the state, and taxpayers, money, Barron said, and comes during a nationwide reckoning centered on equity.

“This is very targeted, and we know how much cost savings we’re going to make,” he said.

But members of the state’s licensed beverage association said the legislation, though important and necessary, would come at a cost to consumers as well as some of the businesses and economic engines impacted most by the coronavirus pandemic.

“We don’t think we should be the ones funding it,” said Jack Milani, legislative co-chair of the Maryland State Licensed Beverage Association. “Why us? It’s already bad enough out here. Times are tough for the small guy.”

Speakers at Friday’s event said the legislation takes on added significance this year because of the pandemic, which has highlighted the health disparities that exist along lines of class, geography and race.

“Certain communities, especially communities of color, do not have the resources they need, which leads to these disturbing disparities,” said Hayes, a Democrat who represents Baltimore.

In Scott’s remarks, the Park Heights native underscored that people in his community tend to have life expectancies more than 20 years shorter than residents of predominantly white communities. This proposal, he said, would identify vulnerabilities in specific communities to correct the disparate mortality rates.

Headed by the Maryland Citizens’ Health Initiative lobbying group, the legislation would build off a previous pilot program that created five health enterprise zones using money from the state’s general fund.

Frosh said the pilot program, which ran from 2012 to 2016, demonstrated its viability and proved that equity zones could help prevent unequal outcomes and lower health care costs. He called the tax increase an “appropriate funding mechanism” that also could help curb underage drinking, binge drinking and driving under the influence.

“It’s a public health win-win,” said Vincent DeMarco, president of the Maryland Citizens’ Health Initiative. “Equity is going to be a top priority this session, and health equity is going to be a key part of that.”

The liquor sales tax increase would only apply to liquor stores for the first two years after enactment, allowing restaurants and bars to recover from the economic shortfalls suffered during the coronavirus pandemic, the group said.

DeMarco said the tax funding could amount to $14 million per year for the first two years and $22 million per year after restaurants and bars start contributing.

But Milani said previous alcohol tax increases have led to revenue drops for the state’s beverage community. And the public health crisis likely will cause economic ramifications for bars and restaurants for longer than just two years.

“It’s going to be a slow return,” he said. “It’s just not the right time to be doing this.”

Health care providers, hospitals, universities, nonprofits and even local government agencies would be eligible for the health equity incentives, according to the text of the bill.

DeMarco said a coalition of about 250 partner organizations has formed in preparation for the legislative session, and it also has support from the county executives in Anne Arundel, Baltimore, Howard, Montgomery and Prince George’s counties.