Monday, October 12, 2009

A Penny For Your Thoughts - RePublic Brewpub

Joe Walts, Brewmaster of RePublic Brewpub soon-to-be of Sun Prairie, provides a more fact-based dissent. You can read an awesome point-by-point refutation at his website.


I've heard a lot of heated debate over the last week about what the new beer tax will actually do. Those of us who are planning on speaking at Tuesday's hearing: I suggest we all read the new bill very carefully so we don't appear uninformed. Here's what I think:

-The reference to producing less than 300,000 barrels does not mean the proposal is a tax for small breweries only. I can see how the language may suggest it, but the phrase is not a change to the current statutes. Given today's application of the law, I think the wording applies to the tax credit only. In other words, only breweries who produce less than 300,000 barrels annually can receive the 50% tax credit on their first 50,000 barrels. Another way of thinking about it is that the word 'section' refers to 139.02(2) specifically and not 139.02 in its entirety. Any lawyers care to weigh in?

-If I'm correct about the meaning of the word 'section', the statement "all barrels exported out of the state shall be included" does not mean that exported beer will be taxed by Wisconsin. It simply means that exported beer counts against the 300,000 barrel limit for the tax credit. I'm guessing that it always has, but that this is an opportunity for further clarification.

The proposal stinks, but I don't think it's as bad as some people are suggesting. Let's not blow our credibility by getting indignant about the wrong issues.

Here's what I told my representative about beer taxes (slightly modified for coherence):

-They're regressive. The excise taxes paid by a farmer will represent a much higher portion of his/her salary than the excise taxes paid by a CEO of a Fortune 500 company who drinks the same amount of beer.

-Reducing alcohol-related crime improves society as a whole. Responsible drinkers, who cause no more problems than non-drinkers, should not be required to shoulder a greater portion of the financial burden.

-Because the tax is collected from the producer, it will experience two additional markups - wholesale and retail - before reaching the consumer. The wholesale markup is typically around 30%. I'm not sure what the retail markup is at liquor stores, but it's in the same ballpark. In other words, the price increase to consumers will be far more than 2.4 cents per 12-oz bottle (the amount that will likely be claimed by proponents of the bill).

-Taxing volumes of beer instead of volumes of ethanol encourage producers to brew stronger beer. The reason why is because strong beer contains more ingredients than an equal volume standard-strength beer. With beers both taxed at the same rate, brewing ingredients are essentially taxed at a lower rate for strong beers.

-Although I generally oppose all excise taxes, AB-287 specifically targets beer to combat alcohol-related crime. However, the least expensive alcohol to purchase is bottom-shelf spirits. If the easiest way to become intoxicated isn't addressed, I believe the bill will be ineffective at achieving its stated purpose.

-The excise tax itself is taxed by the state sales tax.

1 comment:

  1. I agree with Joe's reading of s. 139.02(2)(b). This section defines "eligible producer" for the purposes of who can receive the tax credit provided for in s. 139.02(2)(a). Probably wouldn't hurt to seek clarification at the hearing, however, and get it on the record.


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