New Jersey's tax hike on wine and hard liquor goes into effect today and those in the business say customers will most surely pay more than the fraction of a cent per drink that the extra 25 percent levy on spirits amounts to for distributors.
Gov. Jon Corzine proposed the 25 percent increase and the state Legislature approved it on wine and liquor -- but not beer -- as one of many measures to help balance the state budget in a recession year. The extra tax is expected to raise about $22 million a year for the state.
The tax on alcohol is charged by the gallon. For distributors, the new tax will amount to an extra 51 cents for a 1.75 liter bottle of whiskey, for example, and 3 cents for a standard bottle of wine. But like other businesses, liquor distributors and retailers say the recession is hurting them and they expect to price their wares as they traditionally do -- in increments that end in 49 cents or 99 cents.
Jeffrey Warsh, executive director of the New Jersey Wine and Spirits Wholesalers Association, explained that a $6.99 bottle of wine would probably be bumped to $7.49 or even $7.99 rather than the $7.02 that would cover the tax.
"They gave the distributors the impetus to raise it a little bit more,'' said John Canal, manager of Canal's Discount Liquor Mart in Pennsauken.
Louis Healey of Allied Beverage Group, a Carlstadt wine and spirits distributor, said the industry was "already feeling the pain of what's going on. This (the tax) just adds another layer on top of it.''
Healey said wholesalers won't be the only ones marking up prices. He predicted suppliers, retailers, and maybe restaurants would also. And if consumers cut back on drinking, the markups won't be profit -- just a hedge against bigger losses, Healey said.
Friday at Canal's, a store that attracts residents from nearby Philadelphia, where liquor generally costs more in the Pennsylvania-run stores, some customers said the tax would not matter much to them.
Philadelphians D. Star and J.R. Norville were picking up some beer and a bottle of champagne to celebrate the birth of their new granddaughter. They said higher prices on the bubbly wouldn't make them skip it or get cheaper stuff.
"Quality still matters to us,'' said Star Norville, a travel agent.
Mort Goldfield, a banker on his way from Philadelphia to his vacation home in Ocean City, said he saw prices rising before the tax increase and has been buying lower-priced wine. He said he's been making his nightly glass of vodka with Ketel One, instead of super high-end Chopin.
Warsh said one concern for the industry were those from Pennsylvania -- where it's technically illegal for residents to bring in alcohol from out of state -- and those from New York, where hard liquor is heavily taxed and wine taxes rose in May. Warsh said those customers might have less incentive to stock their bars in New Jersey.