Tuesday, March 3, 2009

A Response To The Wisconsin State Journal's Editorialist

Two articles yesterday about raising beer taxes:

One, an editorial from the State Journal. I almost didn't dignify this with a response since it reads like little more than a press release from some pro-tax lobbyist. But there's a couple of point that I want to make that I haven't, or maybe have?, made before.

"A higher tax on beer — as well as wine and booze — would simply charge a small user fee on drinkers to help pay for all the costly damage a small yet significant number of them cause."

First, let's get one thing straight here. This is a raise on the excise tax. The proposal does not include wine or spirits (more on that later). It is not a proposed sin tax. To the extent the customer would see any increase, yes, it would be minimal. But, we aren't the ones that pay the tax to the state - the breweries do. Right now the beer tax is $2, with a 50% rebate for small breweries. Let's say the proposed tax raises the barrel tax to $3 and eliminates the rebate. If you are brewery that makes 10K barrels per year, you were paying $10K in taxes. You will now pay $30K in taxes. A 300% raise in taxes!!!! How easily do you think Ale Asylum could absorb a 300% increase in taxes? Of course, this assumes that the small brewery rebate is eliminated.

I haven't heard anything to suggest that this rebate would be eliminated. In which case, we keep the small brewery rebate. Do you know how many breweries this tax would effect, then? Three. Miller, Leinies, and New Glarus. I can't imagine Deb Carey will be too happy see her margins decrease against Ale Asylum or Furthermore or Pearl Street or O'So. For these three breweries, they couldn't raise prices, they would have to absorb the "pennies per bottle" because they need to remain competitive against the other breweries who aren't affected by the tax increase.

"Just a couple pennies more per bottle could raise tens of millions of dollars to combat Wisconsin’s drunken driving scourge."

Who wrote this? Sally Struther? Are we funding laptops in Africa? You know what will fight the "drunk driving scourge"? Tougher laws on drunk driving. First time DUI is a ticket?!? No sobriety checkpoints. No Dram Shop Act. If the state isn't going to take drunk driving seriously, why should anyone pay for it? Maybe instead of paying for the consequences, we should focus more on preventing it from happening in the first place? How's that?

"The beer tax should not become just another way to balance the budget on the backs of ordinary people. The beer tax should only be raised if the money will be used specifically to prosecute and prevent drunken driving, which would benefit ordinary people."

Why should it fall only on beer at all!? Why not tax wine and spirits, too? Heck, raise taxes across the board and base it on the amount of alcohol in the bottle. If the problem is with drunk drivers, hit 'em where it hurts - in the cheap vodka and brandy.

Article Number Two from Wisconsin Radio Network.

"The Governor wants to increase the tax on cigarettes by 75-cents a pack. He says beer, when used responsibly, can be a perfectly safe product. Governor Jim Doyle says he doubts [the tax] will happen ...."

Finally, some sanity.

6 comments:

  1. I hope you sent this post to the Journal.

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  2. "A 300% raise in taxes!!!! How easily do you think Ale Asylum could absorb a 300% increase in taxes?"

    The sky is falling!!!!

    "Of course, this assumes that the small brewery rebate is eliminated.

    I haven't heard anything to suggest that this rebate would be eliminated."

    or not. Seriously? A whole paragraph of scare-mongering speculation? And then you immediately refute yourself?


    "Miller, Leinies, and New Glarus... For these three breweries, they couldn't raise prices, they would have to absorb the "pennies per bottle" because they need to remain competitive against the other breweries who aren't affected by the tax increase."

    How many breweries right now just suck up the taxes on their beer, rather than include it in the price? What is the average price per six pack of the breweries you mention? What will Deb Carey do if the tax increase is passed?

    Why not do a little investigative journalism and put together a piece that refutes the claims in the WSJ article with actual facts, rather than hurrying out yet another reactionary, speculation filled response?

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  3. "The sky is falling!!!! ... or not. Seriously? A whole paragraph of scare-mongering speculation? And then you immediately refute yourself?"

    Obviously you missed the point. The point was a) it's not "pennies", it's $20K in my example; and b) it doesn't matter if the rebate is eliminated or not - it's still bad policy. Which is why I showed that under both situations, with or without the rebate, it's hurting the industry.

    "What will Deb Carey do if the tax increase is passed?"

    Again, you miss the point - or else you're willfully ignoring it to be obstreperous. What will Deb Carey do? Nothing. She can't do anything. If she raises her prices to cover her increased tax bill she's now more expensive than her competition. If she doesn't raise her prices, in order to remain competitive, she has to eat the pennies out her current profit margin. That means less money to re-invest into the brewery to do interesting things like champagne yeasts, big alt biers, and other interesting things that makes New Glarus a great brewery.

    "How many breweries right now just suck up the taxes on their beer, rather than include it in the price?"

    Ummm...I would say that taxes are included in the price of every beer sold. It's kind of how purchasing things work. Where else would the breweries get the money to pay the taxes if it wasn't from the sale of their products?

    "What is the average price per six pack of the breweries you mention?"

    A) Seriously?? and B) Did you read the article? Who cares? Taxes aren't paid on six-packs they're paid on barrels.

    "What will Deb Carey do if the tax increase is passed?"

    Did you read the above? I don't need to call her to figure out she only has two options: 1) pass it on to customers; 2) eat it. If others have to pay the tax she can pass it on, if others don't have to pay the tax she has to eat it. It's that simple.

    "Why not do a little investigative journalism and put together a piece that refutes the claims in the WSJ article with actual facts, rather than hurrying out yet another reactionary, speculation filled response?"

    I think I've provided all the facts necessary to refute the WSJ's non-fact-filled editorial. The fact is that the tax bill isn't even written - it's just being debated in public, with terms being bandied about and non-sequitur policy arguments being lumped together to make some sort of emotional appeal to a scurrilous third party.

    A parable: Someone in the government comes to me and says: "Hey, do you mind if I raise brettspiel's taxes? It's going to be used to subsidize investigative journalism. The good news is, it won't cost you anything. The bad news is it will triple his tax bill. I know you like him and all, but investigative journalism is really important."

    I suspect you and I would have very different opinions on that particular piece of legislation. Like the excise-tax bill, it's completely irrelevant what my (the public) opinion is. But the government knows if it asks you (the beer industry) directly, what the answer will be.

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  4. "A) Seriously?? and B) Did you read the article? Who cares? Taxes aren't paid on six-packs they're paid on barrels."

    The taxes are assessed to the brewery per barrel of beer produced. The brewery amortizes the tax bill by increasing the price it charges bars and liquor stores for it's beer. It's beer is sold in kegs and bottles. A $1 per barrel price hike for the big breweries and a $0.50 per barrel price hike for the small breweries, when translated to actual consumer price considerations (your cost per six-pack) is minimal. Both six-packs will go up in price by a comparable, yet insignificant amount. I don't think brewery competitiveness is a real factor in this discussion.

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  5. " A $1 per barrel price hike for the big breweries and a $0.50 per barrel price hike for the small breweries, when translated to actual consumer price considerations (your cost per six-pack) is minimal."

    My point isn't that the consumer may have to pay more - you're right, it's minimal, if it even makes it down to the consumer at all. (assuming "reasonable" tax increases and the maintenance of the small brewery rebate; and, when you're talking about it on the level of the breweries who are actually paying the tax bill, it's still not an inconsiderable amount of change)

    My point is that the consumer shouldn't have to pay more because the state can't figure out how to reduce DUIs and are too incompetent to pass any meaningful legislation that does anything other than raise taxes in an attempt to "fix" a problem.

    My point is also that those who are pushing the tax shouldn't come crying to us, the public, to pressure the breweries into "sucking it up". It's not our (the public's) tax - it's the breweries'. And the government knows that if they ask the breweries for it, that it won't pass.

    At the end of the day, you can cry all you want about "pennies", but it completely avoids the issue. I'll give you pennies when you show me you're serious about the issue. I'll give you "pennies" when you pass a Dram Shop Act that means anything. I'll give you "pennies" when you pass Sobriety Checkpoints. I'll give you "pennies" when you make first time DUI a felony. In other words, I'll give you the money to be serious about the problem as soon as you're serious about actually solving the problem.

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