Increased beer taxes and a license to drink beer

May 21, 2:33 PMBeer ExaminerCharlie Papazian

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American beer and beer culture is under
threat.  It's not a pretty sight.

Holy smokes!  If you make or enjoy beer you can’t help but have noticed the reports of discussions happening behind closed doors in Washington, DC the past week.  There’s been talk of doubling, tripling and even quadrupling the federal excise tax on beer. 

The recent Associated Press story headlines Beer tax on tap for health care?  The story starts out with “Consumers in the United States may have to hand over nearly $2 more for a case of beer to help provide health insurance for all…. Beer taxes would go up by 48 cents a six-pack…”

The fundamentals of beer excise tax – getting it all wrong

Legislators and the press still don’t understand the fundamentals of excise tax increases.  A $2 a case excise tax increase results in no less than the beer drinker having to actually pay out $3.38 of their money; money that has already been taxed.  Why?  Because brewer to distributor to retailer market chain includes percentage markups on the cost of beer. 

Furthermore, if you spend $3.38 on anything these days you need to actually earn about $5.40 (assuming 25% income tax bracket +4% state income tax rate).

The bottom line is that a beer drinker will need to earn $5.40 (before income related taxes) in order to pay for that mythical $2 a case excise tax increase. 

For more explanation see:  How much do you really pay for that beer?   and  Proposed state beer tax increases hard to swallow - impacting jobs and beer drinkers  

Meanwhile all across the country state legislators are trying to increase state excise taxes.  Some have succeeded.  Where there has been a vocal and strong opposition by beer drinkers and beer businesses state legislation has not succeeded.

I think brewers should pay their fair share of taxes, just like any other business.  According to a Beer Institute’s survey  , beer is taxed a whopping 68.6% more than other purchases in the U.S.  Why is the responsible beer drinker being singled out to pay more than other products?  Beer is not a sin.

If there are dramatic increases in beer excise tax, beer sales tax and other beer taxes are implemented the price of beer will rise dramatically.  History has shown that as a result people will buy less beer.  This will impact barley farmers, hop growers, equipment and supply manufacturers, distributors, truck drivers, retailers, restaurants and pubs.  There is a predictable consequence of lost jobs, less income, sales, use and excise taxes collected and additional business closures.

The consequence is harm to the beer business and to those who responsibly enjoy beer.  There will be less choice, less beer culture and I would predict less responsible enjoyment.  It will be a giant step backwards for American beer culture.

What will be next?  Perhaps a license to drink beer.  Could the government charge an annual fee of $10 per beer drinker?  90 million beer drinkers would provide $900,000,000  annually or $9billion in 10 years.  That probably won’t work because it would cost the government tens of billions more to administer and enforce the licenses.

But wait a minute, maybe they could charge a license fee to sell beer.  Guess what - that’s another proposal being considered.  That’s a discussion to have at another time.

Join the beer activist network called Support Your Local Brewery and be on call to help on local, state and national issues threatening your responsible enjoyment of beer.