Thursday, October 15, 2009

AB 287 Hearing Recap

Unfortunately, I wasn't able to attend the hearing on Tuesday. But I asked Chris Staples of Furthermore Beer for his thoughts and he was more than happy to provide some notes. He makes some excellent points and I can only say that I'm disappointed by the extremes and ignorance displayed by both sides of the debate.

While these extremes make for incendiary sound-bites, they add nothing to constructive negotiation and only foster ill-will from the other side and in the public. I expect it from the lobbying groups (health care and the tavern league), I am sorely disappointed to see it in our elected officials.

With that said, Chris Staples:

Chris Staples here. I own a small brewing company in Spring Green, Wisconsin called Furthermore Beer. I used to work for Information for Public Affairs in Sacramento, California where I dealt with legislation from all fifty states and the Federal government on a daily basis. My father was killed in a car accident that was not related to alcohol. My father-in-law (son of the former Chair of the UW-Madison Political Science Department and now deceased) was responsible for killing someone in a drunk-driving accident for which he spent significant time in prison. My wife and her siblings live with the fallout of that destruction every day. I was also at the hearing on Assembly Bill 287 ("The Beer Tax") from 10 am until 2:15 pm. I am still working on sorting through everything I heard and saw, and am will try to put a finer point on my observations, concerns and criticisms in the coming days. But here are a few of my initial reactions:

* I believe the author of the bill is well-intentioned, despite being hard to like: being willfully ignorant or grossly uninformed as regards the three-tier nature of the brewing industry and being very dismissive and smug about how Bill 287 would affect not only our State's brewers, but the economy as a whole is no way to achieve reasonable debate, partnership and cooperation in addressing social ills.

* From the outside looking in, the two most persuasive sound-byte arguments for increasing the tax is that 1) it's only 2.5 cents per bottle of beer, and that 2) the beer tax hasn't been raised for 40 years. As regards the former argument, the Bill's author, Rep. Berceau and her allies seem content to hold on to this notion that it's only going to cost the drinker 2.5 cents, and that consumers shouldn't complain because it affects people based on how much the drink (ergo we tax "problem drinkers" disproportionately), and that industry will simply be able to pass the tax on with no ill effects (or grossly exaggerated negative impact at worst). What was incredibly insulting to me was the lack of willingness or worse, lack of understanding, that the supporters of AB287 showed by adhering to these notions. A tax at the production level gets inflated at the distribution level by 30% and gets again inflated at the point-of-sale by about 30% (depending on the particular retailer or bar.) The suggestion seemed to be that we, as brewers, could somehow bypass the MANDATED three-tier system to make sure this tax doesn't get inflated. Supporters also fail to acknowledge that as craft brewers, we know that our sales will decrease as the price of our product goes up. And yet, our fixed-costs don't change. Therefore, we have to raise the price further. It's unavoidable if we wish to stay in business. So the consumer, whether a light, moderate or heavy drinker, will be paying much more than 2.5 cents per bottle. On top of which, it is my political instinct that a) the author of the bill WANTS THE TAX TO BE INFLATED, despite insisting it is only a 2.5 cent tax increase per bottle and that b) the author knows it would be political suicide to do the thing that would actually achieve the result she seeks, which is to tax all alcohol (not just beer, and not just WIsconsin producers) at the at the point of purchase/consumption and not make this an issue about whether breweries are paying their fair share. Which leads me to the latter argument. Yes, it is true that the beer tax has not been increased for forty years. A fair enough point. But what no one has said is that that fact is a failure of past Legislatures, not of contemporary brewers! If today's legislature suggested raising the beer tax $1 per barrel, it may not provide Rep. Burceau for all the money she seeks for treatment and law-enforcement programming but it would be hard for industry to argue against. Instead, today's Legislature will have the opportunity to enact a tax on the brewing industry that seeks, in one fell swoop, to compensate for a FAILURE OF THE LEGISLATURE FOR THE LAST FORTY YEARS by crippling my business at a time when our industry is already struggling. Rep. Ott asked "where is the money going to come from?" Well, I know one thing for certain: it can't come from me if I'm out of business as a result of a beyond-the-pale tax increase the extent of which I could not have foreseen when I wrote my business plan in 2004. In other words, I am happy to help contribute my fair share. By I can't contribute enough to compensate for the lack of an appropriate and sane tax predating my business by 36 years. And to those who spoke about how unfair it is to have to pay for services we don't use through taxation, I say "get a grip": we all do it all the time. People without kids pay property taxes which benefit the schools. People whose homes aren't on fire or aren't the victims of a crime pay for fire and police services. People who don't drive much pay for roads. People of means pay for social programs that help people without means eat, clothe themselves and their children, provide shelter for a variety of reasons, cover health care costs, etc. Such is the nature of our democracy. And before scapegoating the brewing industry as being irresponsible and not paying its fair share relative to other states, please acknowledge the levels of taxation on our industry relative to other industries and our state compared to other states. As an industry, we pay an astonishing amount in the form of taxes and would appreciate it today's Legislature would consider that fact as opposed to being insultingly dismissive of our concerns.

* Those in attendance heard devastating testimony from Wendy Calvillo, whose twelve year-old son and husband were killed in a head-on collision near Fort Atkinson in February of this year. I don't think anyone in that room will ever forget what we heard. My deepest sympathies go out to Mrs. Calvillo and her surviving children. As the father of two and as a person who's own father was killed in a non-alcohol-related automobile accident, all I can think to say about the injustice she and her family have suffered is horrible, senseless, violent and criminal. And yet, I was left with a competing feeling which I'm reluctant to even voice given the magnitude Mrs. Calvillo's loss: she is seeking emotional solace in the form of a punitive measure on a responsible and heavily-burdened industry which, given the legislative analysis available for Bill 287, has dubious capacity to effect the change it seeks given the vague allocation guidelines and the lack of protection for the funds raised. And I'm very sad to say that I don't imagine that raising the beer tax is going to decrease Mrs. Cavillo's pain. I think that the logical extension of her reasoning and experience is that there is absolutely no acceptable circumstance or condition by which someone loses their loved one in a drunk-driving "accident". And while no reasonable person would disagree with this assessment, the only way to ATTEMPT to achieve this is with total prohibition of alcohol. And we know that even then, people with the desire and/or need will find/make it/consume it anyway. There is a certain risk to individuals and society to permitting any number of products and behaviors: guns, jet-skiing, fast food, alcohol, cell phones, automobiles, unpasteurized cheese. And yet, as individuals and a society, we routinely accept these risks and call it the price of choice and liberty. With all due respect to the Calvillo family and with a heart that cries out in sympathetic agony for their loss, I don't accept that it is suitable to beat-up on the beer industry given the great unlikelihood of prohibition.

* "Smartest Dude in the Room" award goes to Michael M. Miller M.D., President of the American Society of Addiction Medicine and the Medical Director of NewStart Treatment Program based at Meriter Hospital in Madison. He did a great job of cutting through the b.s., identifying the problem, suggesting that the status quo isn't working, offering that Assembly Bill 287 is better than nothing, but also noting that beer, wine and liquor aren't the problem: that alcohol is the problem, and that a tax on alcohol makes more sense than a tax on beer. If anyone in that room was going to win fence-sitters over to the affirmative side of the debate, it was Dr. Miller. My only qualm was his characterization that we grow our businesses by growing our audience, and that the way we all do that is by making our product attractive to children. I think this carryover argument from the cigarette debate doesn't apply to our industry, particularly the craft-end of the industry where neither price nor flavor profiles make the product conducive to consumption by children. Nor do smaller producers possess the resources to reach-out to a younger audience via advertising and marketing. That disagreement aside, I think everyone involved in this debate could learn from Dr. Miller, and I believe he had the best grip on the root issue and would be a great partner both for the industry and for the pro-tax folks. I would personally be willing to help Dr. Miller in any way within my means.


* "Rabid Dog" awards go to the woman from Colorado who has been involved with providing some manner of treatment services for six years and who told the Committee she was there for "informational purposes" (if you wish to speak before the committee, you have to declare whether you are there to speak for the issue, against the issue or are there for informational purposes) and proceeded to go on a five-minute ill-informed industry-bashing tirade. Whatever. Equally asinine was the Tavern League of Wisconsin who proceeded to go on a five-minute embarrassingly ill-supported legislation-bashing tirade that amounted to: "our members can't take any more taxes!" Well that may be true, but why? In both cases, raising one's voice does not add clarity to the debate.


* "Biggest Disappointment" award goes to my own Representative, Steve Hilgenberg, District 51. He gave the least passionate, least detailed and least engaging address to the Committee. "You know, it's time. And people want it." Ug.

* Also notable were three of the Committee members: Reps Bies, Ott and the gentlemen sitting second from the right (as facing the Committee) seated nest to Rep. Berceau. Rep. Bies quite surprised me, perhaps more because of my own assumptions and prejudices: I am a life-long Democrat with a deep anti-authoritarian streak. Rep Bies is a retired law enforcement officer and a Republican. And to be truthful, he was the only member of the Committee who made any damn sense at all. He spoke well. He asked pointed questions. And he seemed to actually follow the debate with an eye toward advancing to a conclusion. I really appreciated his presence on the Committee and his repeated questioning of speakers regarding the efficacy of treatment and the protection/earmarking of the proposed additional funds. Rep. Ott, on the other hand, seemed quite content to admonish and lecture both speakers and audience. I found him to be patronizing and annoying while offering little of merit to consideration of the question. And the third Representative (whose name placard I could not read. Apologies.) seemed constitutionally incapable of understanding the three-tier system, and why, if a tax was applied at the production level, it would increase as it went up the supply chain such that the politically defensible 2.5 cents per bottle became much more at the cash register or bar rail. I literally bounced my head off the table when for the fourth time he became exasperated and asked for clarification on this issue. For goodness sake: do your homework!

Anyone who has read this far probably stands in opposition to this Bill. But on the off chance you are a supporter of AB287 and are still reading, please consider that this proposal has dubious merit: the funds will be poorly protected and questionably allocated, and while the status quo may not be acceptable, there is more than one way to go about change. This Bill truly will hurt an important industry which is already contributes disproportionately and operates on razor-thin margins. In any case, these are my impressions, based on my time at the hearing. Take them as you will, and please know they are offered in good faith and as an attempt to enliven debate surrounding this important issue, not stiffle it. Feel free to pass this along.

Sincerely,

Chris Staples

21 comments:

  1. The Rep. who was rude to brewers and could not understand the three tier system, despite having voted on complicated three tier related legislation last session, was Rep. Jeff Smith, a Democrat from the Eau Claire area.

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  2. Thanks for the review. I actually think that you're right, that certain authors of this bill WANT the price of beer to be higher, and that is why they're taxing it at the brewery level instead of at the point of sale.

    The sad thing is, I would be supportive of this measure if it only did two things:

    1) Tax beer $.025 at the retail level. Every time you buy beer, you pay it, it's added at the cash register (just as sales tax is), and that's that. It's really simple to do, and anyone who's lived in a state that has a $.05 bottle deposit knows how it would work... This would ensure that it's ONLY the $.025 that the supporters claim, not the $.12, $.25, whatever that it would end up being.

    2) The funds are kept SEPARATE and used for specific things that target drunk driving. None of this "may assist" and "general fund" crap.

    I'm just frustrated that this comes up because someone estimated that the overall costs would be $70m instead of the original $15m. No auditing. No accountability. No tax decrease if the crackdown on drunk driving costs less than proposed. It's poorly constructed, poorly written, and seems designed to cause problems from the very beginning...

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  3. I agree about Dr. Miller. It would be interesting to compare his studies and the studies cited by Bill Rogers that contradict each other on the price-sensitivity of underage drinkers. I enjoyed it when one of the representatives asked a testifying high school kid if his peers smoke cigarettes (implying that tons of taxes on cigarettes don't prevent kids from smoking). It was no surprise at all that the answer was "yes".

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  4. Travis There you again with your prohibtionist leanings. Don't fall for the crap about the taxes being for a good cause. This stuff is all about revenue enhancement for the government and controlling behavior. The powers to be are behind the scenes seeing if Berceau can get some stuff going. They have her doing the dirty work on getting this going.
    As far as funds going to a certain area of the budget, not going to happen. Examples lottery for education. How did that work out? Tobacco Money to help those quit, instead it's been used to balance the state budget.
    It sounds like you have a personal interest in drunk driving. Maybe you have been the victim or the perpetrator of the crime. Education and awareness of drunk driving needs to elevated, to get people out of there cars when they have had too much to drink. Maybe you should do some volunter work to combat drunk driving. Step up and help, don't look for the nanny state to care for you. Civil liberties are under continuous assault in america! Don't be a stooge.

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  5. Thank you all for your comments. Anonymous 1, thanks for identifying Rep. Smith. Travis, your last paragraph nails it in many fewer words than my missive: it's just a bad bill, period. Joe, I left as Noble Wray (sp?) was speaking and missed The Malt House Gang. I wish I could have stayed. Anonymous 2, maybe you and Travis are friends and share a familiarity to which I'm not privy, but you guys actually seem to be saying a lot of the same things as regards accountability and squirelly allocation and protection.

    Hey Anon 1 & 2 - perhaps you're the same person, perhaps not. How 'bout adopting a screen name/some screen names so we can at least tell you apart/enjoy some continuity of authorial voice? You are recurring clearly repeat contributor(s) on this forum. ;)

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  6. Lol at the Anonymous poster who's stalking me (awww, I have a stalker, that's kinda cute). Yes, I'm a "prohibitionist" because I don't think that we should laugh and excuse someone who's driving drunk until they kill someone. C'mon, Wisconsin is the only state that I know of that gives you a "get out of jail free card" when it comes to OWI.

    "Sir, you were weaving across the road and had a BAC of .20. Here's your traffic ticket and remember, the NEXT time we won't take it so easy on you..."

    And you're DAMN RIGHT I have a personal interest in drunk driving. When I'm riding my bike home at 10 or 11pm, I don't want to end up as just another statistic splayed across the morning news. I've personally seen cars barely able to stay on the road going 15mph. I've seen cars blow red lights like they were green. I've seen cars swerve into the opposite (MY) lane. Talk about your civil liberties all you want, but your right to swing your fist ENDS AT THE TIP OF MY NOSE.

    And yes, I expect this "nanny state" to protect my life and the lives of those I care about. You seem to think otherwise?

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  7. All good cause turn to fool hardy pursuits when you get the government involved. Don’t fall for the hype that these people are doing this for a good cause, they are nothing but grown up spoiled children, when they loose interest they will drop this cause and go to the next. 911 fund, cigarette tax, and so on did a little good at the beginning and as soon as the press stops bleed their heart all over the subject the government will take that money and dump it into Wisconsin’s growing pit of endless, worthless pork belly spending.

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  8. Thanks for the update Chris. No, Anon is upset that I'm actually for tougher enforcement of drunk driving. He thinks it's part of his civil liberties to be able to drive drunk...

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  9. Travis, I do follow Anon 2's libertarian bent and see your respective takes on enforcement and taxation as being discreet. But your analyseees of the bill's shortcomings aren't that different, or at least that's my read. Thanks for reading and for your input in any case.

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  10. Travis - Jee wiz do you need the government to tell you to wear a helmet, or where a reflective vest or have a light on your bike when riding your bike at night. Common sense should tell what to do and what not to do.
    Here's a tip for you and anyone else. If you see someone weaving on the road or blowing off red lights, call 911 to report the incident. Let the authorities know of it so they can take care of it.
    Once again most people take OWI seriously and don't drive drunk. Cheers!

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  11. "And yes, I expect this "nanny state" to protect my life and the lives of those I care about. You seem to think otherwise?"

    I do think otherwise. I don't want the Gov't to protect me. They shouldn't have to tell me how to protect myself. If I don't want to wear a seatbelt, thats my perogative, I'm not hurting anybody. Granted, comapring the seatbelt issue to drunk driving is apples to oranges, but the point is, can make my own decisions, I have common sense, the Gov't doesn't need to step in and tell me how to live MY life.

    I, for one, believe in personal responsibility and that one should be accountable for one's own actions. I don't believe anyone should rely on the Gov't to fix their problems, protect them and their families, and/or financially support them. But that's just me.

    That said, I do believe Wisconsin would benefit from harsher drunk driving laws.

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  12. Also, like others, I would support this tax if:
    1) The funds supported the causes the AB287 supporters are championing (which it sounds like it won't).
    2) It applied to all alcohol/brewers.
    3) It was applied at the retail level.

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  13. Chris-

    Thanks for the eloquent and level-headed wrapup of the hearing. I agree that no matter what side you fall on, having a reasonable discourse is the important thing. This shouldn't be about who is yelling the loudest.

    Oh, and thanks for the Knot Stock and Three Feet Deep, too. That's some good stuff.

    -Matt

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  14. I want to thank Anonymous 1, and 2 along with Travis and the rest of you for making Madison Beer Review so entertaining the past few days. I sit here day after day in my hot little brewery making Grumpy beer as people stair at me through the glass. It has been a great distraction form my busy day.

    287 is a poorly set up bill, granted, it could hold some water if the tax level was not so high, it focused on the alcoholic beverage industry as a whole, (liquor, wine, craft beer and domestic beer) and if there was some true direction in which the money was to end up.

    You’d think after 6 years of working on this bill Rep. Terese Berceau could have put a soul in it.

    the Captain, Grumpy Troll

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  15. To Anon - I want the government to protect me from other people, not myself. If you want to kill yourself in a one-vehicle accident, be my guest. The issue is if your drunk driving kills me, my wife, or someone else that I care about that's the problem...

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  16. Mark - do you have a sign on the glass window that says "Please don't feed the Troll"? :)

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  17. Thanks for the great wrap up Chris. This is a bad bill and Berceau knows it. She has been banging a prohibitionist drum for years now and she knows she stands a good chance of paaing it now because she and the other irresponsible spenders up at the capital are unwilling to figure out cuts to plug the holes in yet another terrible budget. This is not a dems vs. repubs issue. This is an elected officials vs. the people who voted for them issue. I have already made it very clear to Mark Pocan that if he votes for this tax I will not only not vote for him I will actively work against him. The time has come to call them on their BS.

    Oh and Anon....grow a pair and put your name on your posts.

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  18. Hey now, that is uncalled for. I would give you my name but from the last few elections I know how you liberals deal with your opposition and I don’t want my tires slashed.

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  19. Adam,

    This is absolutely a Republican vs. Democrat thing.

    Here is why.

    This session this bill will die. It will die because 45 out of the 46 Republicans in the Assembly oppose it and in a pinch the squishy 46th will oppose it too.

    Urban Democrats support it but they don't have the votes to pass it on their own. They need a few Republicans or the rural/moderate Democrats to sign on. They will fail.

    Rural Democrats know that they can't take the heat from local tavern owners on this bill. They want to vote for it since the prohibitionists and health care bureaucracy that advocate for the beer tax are close allies to the Democrat party. Still they can't. A few rural Democrats even genuinely oppose this bill...a few, but not many. Rural Democrats like Steve Hilgenberg, an author of the bill, and Phil Garthwaite from Grant County are huge supporters and in general most Democrats openly support this bill. Most Democrats that don't openly support the bill support it in private.

    Nearly all of the GOP on the other hand oppose this bill outright an always will.

    But...that is not why this is a Republican vs. Democrat issue.

    This is a Gop vs. Dem issue because of what will happen in the future.

    If the GOP takes back the Assembly, Senate, or Governorship in the next election, the beer tax is dead. It will not become law.

    If the Democrats maintain complete control of State Government, the beer tax will become law. It probably won't be a 400% increase. More likely, it will be a modest 100% or 200% increase and it will be shoved into the next budget bill at the last second so that we have no say on it.

    The revenues it creates will be segregated for AODA treatment or similar purposes, however, an amount equal to the revenue generated by the new beer tax will be raided from existing funds for such treatment and returned to the general fund. In other words, not one penny of the beer tax increase will be used for actual AODA or similar treatment. (This is basically what has happened with tobacco tax and gasoline tax revenues since Governor Doyle was elected).

    After this, Democrats will be able to redistrict unopposed. The GOP will lose another 5-10 seats in the Assembly and another 2-3 in the Senate in the 2012 elections. At this point the Democrats will have nothing to fear politically. The next budget will raise the beer tax by several 100% more. If the Governorship doesn't change hands, it will get worse in the following budget.

    That is why it is partisan. Say what you will about the GOP or the Democrats in WI. Your own Democrat Rep. might even tell you that they will stand up for you now. That doesn't really matter though if the Democrats maintain complete control. The beer tax will increase, and it will increase by far more than 400%.

    Call me crazy, but divided government is a beautiful thing.

    Oh, and I am Anon. #1. I didn't post any other comments though.

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  20. When I first started reading your response I was set to blow up and wirte a scathing reply but then i did the grown up thing and actually read your post.

    I can see where you are coming from and in a sense you are right but I will do you one better. This is less about parties and more about good government versus bad government. It has been shown (at least in my lifetime) that Wisconsin government has been bad no matter who is in charge.

    The Republicans under Tommy and McCallum blew up spending in this state and had no way to pay for any of it. Then along came the tobacco settlement and taadaa we ended up selling off money over time for less money right now. I still don't know how they got away with that.

    Doyle has been no prize either. Whichever party controlled the legislature under him has not stood up as the champions of responsible spending.

    So what we get are tax increases. These tax increases however are the most insidious(sp?) because they are disguised as user fees. They are also sold by tugging at the heart strings of Wisconsin residents. After all who can say no to reducing drunk driving or helping people quit smoking? Then in the most dishonest way possible they pull the funding away from those things and use it to cover the bills they have run up over the years.

    Honestly you and I probably agree on a lot of issues. Not using your name to post is not one of them i guess, but that is not my point. The point is you trust the Republicans to be more responsible leaders than the Dems. I disagree, I think that right now they are all the problem. There needs to a fundamental change up at the capital and soon or we are in trouble.

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