February 16, 2004

Michigan Restaurants Oppose Tax Hike on Liquor

The Michigan Restaurant Association today voiced its opposition to a proposed tax increase on the purchase of liquor products throughout the state. Restaurant operators with liquor licenses stand to pay anywhere from $1,000 to $6,000 more for liquor purchases, depending on the amount they buy, if the Legislature adopts the proposed increase. "The majority of this state’s restaurants are small, private businesses that can’t afford this tax hike – especially considering the extremely tight economic environment restaurateurs are competing in," said MRA Executive Director Rob Gifford. "The restaurant industry has been hit hard with higher costs in recent years, on everything from skyrocketing property insurance and health care costs, to increased labor costs, and even our products with the ever-rising costs of beef and other foods. These higher costs of doing business are forcing many of our operators to make cutbacks, layoffs and sometimes close entirely." Under the proposal, the mark-up price on liquor that restaurant owners and retailers pay to the state will go from 65 to 74 percent. The state hopes to generate $32 million from the tax, but restaurant operators argue the gain is little compared to its damaging potential on small business owners. "This tax increase will have little impact on the state's budget overall, but it will have a drastic effect on a restaurant's abilities to survive economically," Gifford said. "Our operators can expect an additional $1000 to $6000 annually in taxes. In an industry where a 5 percent profit margin is considered high, owners cannot afford to shoulder a tax increase this large." Restaurant operators with liquor licenses from across the state would be hard hit by a proposed tax increase on liquor, as demonstrated by information collected from the following MRA members: an East Lansing restaurant owner will pay $9,000 more at two locations; an owner with two restaurants in mid-Michigan will pay nearly $5,000 more; a Detroit restaurant owner will pay almost $6,000 more; and a West Michigan restaurant operator with 8 locations will pay about $18,000 more. "Michigan’s restaurant and foodservice industry is one of the largest jobs providers in the state, employing more than 345,000 workers," Gifford said. "Another tax increase on liquor means thousands of employers are going to be faced with the difficult decision of deciding where or whom to cutback." Founded in 1921, the Michigan Restaurant Association represents more than 4,500 Michigan foodservice establishments. The foodservice industry plays an integral role in Michigan’s economy, employing more than 345,000 people and creating $11 billion in annual sales. For more information, call (517) 482-5244, or visit the MRA website at www.michiganrestaurant.org.