It is interesting to follow beer fans in different jurisdictions in the US and the UK react to various plans to use beer as one way to cope with the global economic crisis. The British Beer and Pub Association backed by CAMRA and many brewers is running the Axe the Beer Tax campaign. States like Illinois are thinking about making changes while others like Wisconsin may leave them where they have been for forty years. Jay points out that the US Federal tax might be tripled from 18 to 45 bucks a barrel but is that really stupid or just reality in an economic collapse? Just as it makes no sense when a certain sort of politician advocates for lower tax on business income to get small businesses started – no sense because they have no profits to call income at that stage – similarly, in a downturn, you can’t raise taxes on the limp sectors of the economy economic activity. So, if there are going to be taxes – and, yes, there are going to be taxes – why should beer be exempt?
Amy Mittleman in Brewing Battles points out that modern taxation policy was largely created in the mid-1860s to react to the nation’s financial need to pay for the Civil War. Beer and brewing was the chosen conduit for the taxation as was follow existing European models with the aim of creating the greatest level of consumption and therefore the greatest revenue stream. She also points out that the Federal beer excise tax on beer was set at 9 dollars a barrel almost six decades ago under the Truman administration. The tax level now in after inflation dollars has simply not kept up given $100 in 1952 is now worth $798.87. Fully adjusted taxes would make for about $72 per barrel of Federal excise today at Truman’s rates. Obama’s Senate pals are considering $45. Jay quotes Jeff Becker of the Beer Institute as part of his argument:
In 2008, members of the beer industry paid more than $41 billion in taxes at all levels of government and provided jobs to 1.9 million Americans. Any proposed tax increase would severely offset this important economic contribution.’”
Really? Any tax will threaten it? Will “wipe out an industry”? Seems like the socialists do pretty well on the beer consumption scale. Look at it this way. In these tough economic times there are two western economies which are sort of standing out. Norway is booming and the Obama administration is looking to dull old Canada for banking regulatory lessons. Despite cursing it as we do, both Norway and Canada beer fans live in cultures with a pay-as-you-go mentality with high beer taxation. When I was a kid in Nova Scotia the beer cases even had “includes health tax” written on them right next to “union made” right on top. We paid the tax and were quite happy when the ER visit didn’t turn into a question about could we afford it. We also had no choice. Unlike today in the UK, there was no cheap booze alternative undermining the marketplace in the Maritimes. Well, except in PEI… but that is another matter.
Look, I am not going to say “oh, goodie goodie goodie, a new tax” but at the end of the day isn’t there an effort going on to somehow roll back the clock to about 1857 when shock and dismay is expressed over taxes on beer even in a time of economic recession?
[Original comments…]
Jay Brooks – May 20, 2009 11:24 PM
http://www.BrookstonBeerBulletin.com
Well, obviously I do think it’s very stupid to tax one industry and not all industries uniformly. I do think it’s stupid to pick on the one that many people don’t morally like. Beer shouldn’t be “exempt,” but as it stands now, except for a couple of exceptions, everyone else is. Why is that okay?
What you didn’t mention about the excise taxes imposed to pay for the Civil War was that they taxed all sorts of “sins,” not just alcohol and tobacco, but also things like billiard balls (because gambling was a sin) along with carriages (the automobiles of the day), yachts, pool tables and even playing cards. After the war, all were rescinded except alcohol and tobacco. So since that time, alcohol has paid more taxes than any other product produced in the country because it pays all the same taxes that any other business pays plus both state and federal excise taxes. Just because it’s been that way for such a long time doesn’t make it right, at least IMHO.
Obviously, when you need to raise money there will be taxes, as you point out, but I believe they should fall on everyone equally, not be targeted to specific industries. As for Becker’s arguments, of course it’s partly hyperbole, just as the New Drys who are pushing for these taxes use. He’s obviously engaging in “zealous advocacy,” the duty an attorney or advocate owes his client. Should he have said “oh, we could probably afford some new taxes” instead? Certainly not at such an early stage in the unfolding of this proposal.
You’re not worried we’ll invade Canada next so we can tax you? It didn’t work the other two times we tried, but who knows. Maybe the third time’s the charm. 😉
Alan – May 21, 2009 8:44 AM
I dare you to invade us. You couldn’t come close to taxing us the way we tax ourselves! We are also progressive taxers. Those with money pay more. The everybody pays the same approach is ultimately regressive and attacks those with less unfairly. You invade us, you will have to deal with such socialist cultural principles. So consider your plans carefully.
“Zealous advocacy” only goes so far and often undercuts the argument through looking like a ninny. The zealot (or are they zelotians?) misses the point sometimes. For good tax policy, one has to keep in mind what can and cannot be taxed without hampering the activity being taxed. We, for example, have never had a tax exemption in Canada for mortgage interest costs. Helped avoid the housing bubble as it turns out. Tax policy can be a good thing.
What about beer? A few years ago, our Federal Excise tax on beer was lowered for smaller brewers on a sliding scale based on production. The government saw an opportunity to assist small business. But it did not extend the tax to big beer. Yet big beer sells. There is a similar thing happening in the US. It seems to me that the US Federal excise tax on craft beer is now smaller (7 bucks) than it was in 1951. Unfortunately it is not sliding scale so much as all or nothing based on the “definition” of craft beer as 2 million barrels. Wouldn’t it be better to most help the smallest? Is anyone advocating for that? Not really.
There are other approaches. Australia is discussing lower taxes for lower strength beer. I like that, too. There is something in the US economic model now that plays against 3.5% in favour of 9.5% to the detriment of the consumer. Is anyone advocating for that? Not much.
Zealot advocacy makes me notice that and can make the clients of the zealot seem like a bunch of whiners. At this time of crisis, beer is relatively robust and an area with consumer acceptance of taxation. You may think that we are all brainwashed by doctored maple syrup but I will still pay taxes tomorrow, next month and next year on my beer. Healthy taxes even. What I would like to see is a scheme that softens the blow on the true craft brewers and otherwise makes for a pay as you go world where expenditure meets revenue.
Knut Albert – May 22, 2009 10:09 AM
http://knutalbert.wordpress.com
There are various aspects to this. I think a major problem here in Norway is that the gap beween taxes in neighbouring countries leads to an undermining of the whole system. Norway is not a member of the European Union, so we do not have the possibility of filling up our cars in Germany or Denmark and driving home with our loot. Legally.
At the same time we have open borders. I don’t know how many cars are stopped by customs. One in a hundred, perhaps? On busy holidays probably less. The customs people focus on professional smugglers and drugs, as they should be.
We are then in a situation where a large number of the general public buy their booze in Sweden or Denmark and smuggle it in. It means large scale home destilling, too. It means that the Norwegian government loses revenue from all this alcohol. If they cut the beer taxes by 25 per cent, they could possible get more in.
When you have tightly controlled borders, it is something else. Between the Nordic countries we have been travelling freely since 1948, and now this applies to most of Europe.
Alan – May 22, 2009 10:35 AM
Canada has decent controls at the borders as well as regulated beer price minimums. Plus for most people it is just too far to go to get to the USA and they like marco-brew anyway.
Smoove D – May 23, 2009 6:05 PM
http://www.propellerskies.com/
Or the government could stop wasting money paying bonuses to the rich bankers that destroyed the world financial system and get rid of the billions in dollars we waste in corporate welfare, thus closing the budget gap with no need to raise taxes on beer. Less government, more Guinness!
As a practical matter, if the gov’t raises taxes onerously, I will just home brew more, going all grain if they start taxing malt extract.