Are All Beer Taxes Bad?
The Senate Finance Committee is currently considering a proposal to increase the excise tax for alcoholic beverages — beer, wine, and liquor — as part of a health-care reform strategy. Craft beer producers are up in arms, and while I sympathize with their cause, the hubbub is in danger of becoming misconstrued.
The Brewers Association, a trade association for craft beer (and the folks behind Savor), is asking people to write their senators in opposition of this tax increase with its "Support Your Local Brewery" campaign. At the start of the campaign, the association sent a letter to the Senate Finance Committee detailing its opposition to the proposed plan and generally outlining craft brewers' importance to the economy.
Of its main points, the Brewers Association letter is absolutely right about one thing: taxing beverages based on their alcohol content is wrong. The Finance Committee plan would create "a uniform tax based on the alcohol content...imposed at a rate of $16 per proof gallon on all alcoholic beverages." (A "proof gallon" is a unit of measurement equal to one gallon of liquid at 100 proof, or 50% abv.)
This means that all alcohol — beer, wine, and liquor — would be taxed federally based on its abv. Given the enormous differences between the processes of beer, wine, and liquor production, this seems like an immature oversimplification. By focusing only on alcohol content, the proposal treats alcoholic beverages as a health ill (which they certainly are) but not as a craft food product (which they also are). Of proof-based taxing, the Brewers Association letter says:
If such a proposal becomes reality, there is no question that many small brewery businesses will suffer, some will close and consumers will face higher prices and diminished choice in the marketplace.
My problem with this is in the way I hear the Brewers Association's position simplified (or misconstrued) by other Web sites, bloggers, and brewers. Some copy-paste the letter unedited. Some omit the part about proof-based taxing — the most important part — and thereby simplify the issue as much as the Senate Finance Committee did. Some retreat into full-blown get-your-laws-off-my-beer NIMBYism.
At Lupulin Reunulin, a tasting event at RFD on May 29, Dogfish Head's Sam Calagione went on an (admittedly somewhat drunken) rant equating any increase in beer taxes with a catastrophic impact on craft brewers. This notion was met with nods of agreement from several other brewers at the event.
What these brewers were saying is that a climb in prices would depress beer sales. But any drinker can tell you beer prices have been climbing for two years, a result of shortages of hops, barley, and other cereal grains. Prices continue to climb. And yet, the Brewers Association notes, craft beer's market penetration continues to grow, even accelerate.
Proof-based taxing is undoubtedly rash and imprecise. Hopefully lawmakers will see this and refine the proposal before going forward. But if health care funding is a must, let's not dismiss excise taxes out of hand just yet. They might not even hurt beer sales. And the proposed increase? Only $3 per case.
My question to all of you is: Would paying another dollar per six-pack keep you from buying your favorite craft beer?
Photo by Darrow Montgomery