Bar crawl: Indiana reforms will slow business for Illinois liquor store owners

Bar crawl: Indiana reforms will slow business for Illinois liquor store owners

The cocktail of excise taxes heaped onto the sale of alcoholic beverages hits Illinois liquor stores near the Indiana border.

It could be said that the spirit of St. Patrick graced the Indiana Statehouse prematurely.

On Feb. 28, just weeks ahead of the celebration of Ireland’s patron saint, Indiana Gov. Eric Holcomb signed into law a measure that rolled back the state’s Sunday alcohol sale ban, according to The Associated Press. Indiana has placed restrictions on Sunday alcohol sales since 1816.

But while Hoosiers might toast to the refreshing dose of personal freedom returned to consumers and business owners, their Illinois neighbors might see business bolt across the border.

Sunday subsidy

Liquor stores on the Illinois side of the border have long benefited from Indiana’s Sunday sales ban. Restrictions against purchasing alcohol on Sundays didn’t eliminate liquor store runs in Indiana, it merely rerouted them to Illinois. Inside Indiana Business reported that Holcomb acknowledged as much when he declared while approving the reform, “there is absolutely no need anymore to make a run for the border.”

This explains the anxiety expressed by Illinois business owners over the prospect of the relaxation of Indiana’s liquor laws. Already hobbled by onerous “sin” taxes and a morass of regulatory impediments and inconsistencies, the loss of this boost in weekend business activity could pose a substantial financial setback for many Illinois liquor store owners.

Sobering sales taxes

Between-state traffic moves in both directions. While most Illinois border towns have allowed Indianans to skirt Sunday liquor store regulations, the sting of high sales and excise taxes put Illinois stores at a disadvantage for the remaining six days of the week.

While Indiana’s statewide 7 percent sales tax rate is higher than Illinois’ 6.25 percent state levy, the absence of locally applied sales taxes in Indiana renders an overall lower average sales tax burden, according to the nonpartisan Tax Foundation. Yet it isn’t just multilayered county and local sales taxes that spike the cost of alcohol in Illinois, but among the highest alcohol-designated excise taxes in the country as well. The Tax Foundation finds Illinois’ top per-gallon tax rate on spirits to be more than 200 percent higher than Indiana’s.

Indiana imposes an alcohol beverage tax of $2.68 per gallon on hard liquor with an alcohol content specified at “21 percent alcohol or more.” Illinois’ liquor tax is triggered at a much lower alcohol content, collecting $1.39 per-gallon on beverages comprised of “14 percent or less.” For spirits more than 20 percent alcohol, the rate shoots to a striking $8.55 per gallon – more than 200 percent the rate for liquor composed of the same alcohol concentration in Indiana. Beer, meanwhile, is tapped for 23.1 cents per gallon in Illinois, more than double Indiana’s 11.5-cents per gallon beer levy.

This tax burden weighs heaviest in Chicago, with city and county alcohol taxes tacked onto a combined local sales tax rate that is the highest in the nation among major cities, tied with Long Beach, California.

The morning after

While a deregulatory triumph for Indiana, Illinois establishments that once gained from Indiana’s strictness are sure to take a hit. Unfortunately, many lawmakers in Springfield appear unwilling to address hurdles facing businesses owners. And with progressive income tax proposals floating through the General Assembly, entrepreneurs have taken note that their interests are off lawmakers’ radar.

Entrepreneurs in Illinois deserve a business environment in which profitability relies on hard work and ingenuity, not the misguided policies of neighboring states.

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