Tuesday, May 31, 2011

Let's talk beer- and taxes - and beer taxes!

And why not, it's summertime, and we all want to think about warmer weather and quality brews, right? I'm know I'm Terrace-bound with this in mind tomorrow.

One source of revenue I want to discuss is Wisconsin's beer tax. Wisconsin's beer tax was the 3rd lowest in the country as of the end of last year, at $1 a keg, or about 4 cents a 6-pack. The only states lower are Wyoming and Missouri and Colorado is 4th-lowest, amazing how 3 of the 4 states with the lowest beer taxes are home to the 4 biggest brewers in America, isn't it? (Check out the list yourself, with a reminder that Miller and Coors are now merged.) So, despite the 2.5 kegs-per-Wisconsinite for our state in 2009 (6th in the U.S.) , the state only pulled in about $9.6 million in beer tax for the most recent fiscal year. And when you consider the state is slated to get $12.9 billion in revenue for 2010-2011, it means just over 0.05% of all revenues come from those outstanding fermented malt beverages.

But that figurative drop in the bucket still doesn't mean there aren't places where beer tax policy can help the state's bottom line. The 2nd point in this DOR link mentions that any brewery which makes less than 300,000 barrels a year gets half of their beer tax back on their first 50,000 barrels. In Wisconsin this means pretty much anyone not named Miller falls under this category, though Minhas may be getting closer as it takes on more business. Even with its recent expansion, New Glarus doesn't get halfway to this 300,000 barrel figure. And with this exemption in mind, I think the state of Wisconsin could do much more to encourage our growing craft brewing industry.

A good combo policy could work as follows: Doubling the beer tax to $4 a barrel, but also raising the "half-off" exemption to 150,000 barrels. This means Wisconsin microbrewers would only pay a minimal amount of new tax ($50,000, or $1 on the first 50,000 barrels), and the overall beer tax would still be in the bottom third of all U.S. states. At the same time, the beer tax collected would go up significantly, probably in the $8 million range or so, with the burden falling on Miller Coors, a company that can well afford the increased costs.

Also, the increased taxes can encourage more consumption of the products of the local small brewer. In addition to familiarity, one of the reasons MillerCoors draws a lot more in consumption (even in a place with microbreweries like Wisconsin) is its generally lower price vs. the small brewer. This is hardly surprising, as Miller, Anheuser-Busch and others have huge economies of scale that make the next 10,000 barrels they brew very cheap to produce, and is a way they can keep prices lower. It's harder for a small brewer to do the same, as the regular costs of making beer and maintaining a brewery are spread among a much smaller amount of product (I'm leaving the higher care and quality part out of it for now). So the casual drinker often chooses macrobrew at $5.50 a 6-pack over microbrew at $7.99-$9.99. If you raise the beer tax (which is paid by the brewer, so they'll pass the tax as part of the price it asks from the business it sells the beer to), it is logical to assume that this will lead to a similar increase in prices for consumers. It's also not very logical to assume that beer consumption will greatly change because of the higher prices as, well, we're in Wisconsin and we like to drink beer. There's a certain inelasticity to our desire to have a coldie or 6. (I know I have one)

Granted, the price difference here may be small (likely $5.75 vs. $5.50), but it makes the premium for the microbrew seem a bit less, and can cause the buyer to substitute for the good stuff, either at a store, or in a bar. There's also an additional revenue increase through increased prices, as sales taxes of 5% kick in on a higher cost.

The small brewers also are the ones more likely to expand and add jobs through the expansion, much like what we've seen in New Glarus and in Stevens Point in recent years. And you'd certainly think that would be a trend our Legislature would encourage, being that we're "open for business" and all.

Well, you'd think so. But of course, they don't. In fact, WisGOP and co. are trying to limit microbreweries from controlling their own distribution, and the Wisconsin craft brewers are not happy about it. Not surprisingly, the big boys at Miller would love for the little guys to fight them out for shelf space by dealing with a wholesaler instead of allowing the small brewers to get their own ways and prices into the market.

And again, "open for business" really means "open for big corporations to exploit", and not so open for everyday Wisconsinites- especially those living their dreams of running their own brewery. Pathetic, but par for the course for these people.

Sunday, May 22, 2011

"High-taxed" Wisconsin? Not on sales and gas taxes

I always notice when the Sykes-types whine about Wisconsin's taxes, they conveniently leave out that our sales taxes are extremely low compared to other places. Don't believe me? Check your bill at the grocery store the next time you go. Yesterday I grabbed about $35 worth of food, and paid a sales tax rate of just over 1% (I got a couple of multi-packs of soda). If I had to pay 5.5% sales tax on that like other products, that would have been another $1.50 or so that would have come out of my post (income) tax income. Multiply that by several trips to the grocetry store a year, and that's a lot of money staying in my pocket.

And as page 17 of this LFB report shows, there are 14 other states that don't give this tax break to their citizens - almost all red states. That report also mentions that Wisconsin's 5% statewide rate is the lowest in the Midwest, with very low County and local sales taxes (compare to a place like Chicago, with its 4% local sales taxes, or Indianapolis with its 2% prepared food tax, and it makes a big difference).

Another interesting point on that LFB table is the 9 states that impose sales taxes on a gallon of gasoline, including the nearby states of Indiana, Illinois, and Michigan. Wisconsin chooses not to go this route, and instead stays with a flat 32.9 cent-a-gallon tax on the 3.1 to 3.2 billion gallons of gasoline consumed in Wisconsin each year (page 3). Combined with the 18.4-cent Federal gas tax, it means you pay 51.3 cents a gallon in taxes when you go to the pump in the Badger State.

With the recent run-up in gas prices, not having a sales tax on gasoline now means Wisconsin's gas tax rate slips down to 12th in the nation as places like Floriduhhh, Michigan, Illinois and Indiana zip past when the pre-tax amount goes over $3 a gallon, and now is only 1.8 cents a gallon above the national average, with pump prices well below those other states. And unlike several other states, Wisconsin doesn't have the extra user fee of a toll road like many other states. This makes Wisconsin is quite friendly on the tax burdens put onto tourists going through our state compared to our neighbors.

Keep your eye on these sorts of things, because it's Wisconsin's low sales and use tax rates that keeps us in the bottom 10 in states for sales tax burden, and middle of the pack for the all-tax burden. It shows me that if we made the FIBs and other tourists pay more in sales or gas taxes, we could use the savings to cut into our comparitvely-high property taxes, and still maintain the high quality of services that has kept Wisconsin ahead of most states during this economic downturn. So instead of handling the high-(property) tax "problem" by gutting local aids and services and driving down land values further, maybe we could throw the burden onto the tourists and SUV users, and end up a whole lot better off.

But then what would the daytime talk-show whiners have to complain about?

Wednesday, May 11, 2011


Hate to say I told you so, but I told you so. Wisconsin is on target for a biennial budget surplus near $215 million for the end of this fiscal year. And no, that doesn't count any additional savings from the budget "repair" bill, as the LFB notes that it isn't in effect, and won't effect any fiscal year that ends in 7 weeks.

Well, how did this happen is we're so "broke"? Biggest reason given is the strong increase in income tax collections, especially given that "payments remitted with returns have increased by almost 35% compared to last year, and refunds are 7.3% lower." So why did this happen? The LFB credits "large gains in the stock market since early 2009 and improved business profits of pass-through entities...that are taxed under the individual income tax." In others words, "Thanks Obama!" for the big runup in stocks and stability in the job market, and "Thanks Jim Doyle and Legislative Dems!" for reducing the state's write-off for cap. gains from 60% to 30% in the last budget (guess that "disincentive" didn't keep gamblers from locking in gains, eh?). You know, the cap. gains exemption that Walker and co. want to turn from 30 to 100% on long-term holdings and on using the proceeds for God knows what in a business? Yep, that one.

An interesting sidelight of the LFB report is a drop in sales and corporate tax revenue, partly due to a consumption slowdown in things that have sales taxes in Wisconsin (which doesn't include groceries and gas, by the way), and because of Scotty's giveaways at the start of the year to corporations. This actually lowers the rev's by $193.4 million for the upcoming biennium, or else we'd really be in good shape. Of course, the LFB assumes that economic activity will continue at a decent growth pace when significant amounts of the population are seeing take-home paycuts and services for needs like health insurance are being slashed. Somehow, I doubt this would be true, unless Obama's record on the economy in the next 2 years ends up even better than it has been so far (which is something I bet Republicans like Walker and WMC do NOT want to see, because it means landslide 2012).

Lastly, the LFB says there is a projected budget surplus of nearly $660 million for 2011-2013 based on these better revenue projections and Walker's proposed budget. But again, this assumes that all the K-12, university, transit, medical service, and local government aid cuts will have no effect on the revenue side or in the state's overall economic growth. And as mentioned, that won't happen, and you wouldn't like to find out what the real result would be.

You know, I'll stop harping on this topic when WisGOPs stop lying about our state's fiscal situation. Don't bet on it happening in the next couple of months, but that'll just fuel the recalls from the majority of us in the reality-based community. In the meantime, it's more ammo for my trip to the Capitol on Saturday.

Monday, May 9, 2011

Things stay strong despite the GOP, not cause of it

Another month, another strong employment report, this one indicating an additional 244,000 jobs were created in April, , and 268,000 in the private sector. It marks a significant barrier, as employment bumped higher than the level it was at in April 2009, which was one month after...the stimulus bill was passed.

Sure, some may say we should have blowout growth after such a deep recession, but if you look at the recessions in the early 1990s and early 2000s (the two since high interest rates went away and taxes were lowered in the '80s), you'll see it takes a lot longer for the jobs to come back. When businesses get rewarded for hoarding profits and gambling over the disinicentive of high income tax rates on retained earnings and capital gains, this is the obvious result. And a place that should be looked at if we're ever going to be serious about tackling our deficit. Despite the fragile situation of $4 gas and the similar bubbles in commodities, the real economy has been moving along just fine, regardless of how badly the Congressional GOP wants to shut it down for 2012 electoral reasons.

With that in mind, I don't want to hear Scott Walker taking any credit for increased employment in Wisconsin since his reign of error began 4 months ago. The new jobs numbers for the state should be out in a week or so, and we'll see if Walker's Admin can start to match the increases this state had under Jim Doyle and the Dems last year.

Based on the increase in the U.S.'s job market in the last 4 months, Wisconsin should be at +14,230 jobs for the year to be keeping pace. Now, that's not a high bar to clear, as anything better than a loss of 4,600 jobs keeps Wisconsin above pace, but it's nowhere near as impressive as the state gaining jobs while the U.S. was losing 1.27 million jobs from 4/09 to 4/10. And the Doyle/ Dem recovery will be a big reason behind what I bet will be a surprise revenue report coming out this week from the LFB that'll show we never needed to "adjust" the budget for 2009-11, and that our projected budget deficit is nowhere near as "broke" as the Sykesists have tried to lie to you about.

But all this good news will start getting reversed when the budget cutbacks hit. Right now, it's been all talk and no real change (kinda like Scotty's threats to lay off state employees and prosecutors), but if the WisGOPs in the Legislature do even half of what Scotty wants in the budget, the domino effects will be serious at the local government and private sector level, and I'd have a hard time believing Wisconsin stays above trend. Those declines should be hitting in early Fall. Just in time for Walker's recall petitions to go out....

But wait, we have building projects to do that'll help employment, including the reprogrammed high-speed rail money, right? Uhhh, not quite. Amazing how striking stupid poses to score political points tends to be a strategy in getting those people to help you out. (The Confederate states of Texas and Virginia are finding this out the hard way on their requests for FEMA disaster aid as well- guess ya'll ain't so tough when random bad things strike, are ya?)

And along with Scotty's blundering on getting the rail upgraded, something you might NOT know about our rail budget is that Walker and the Joint Finance Committee are going to shell out more state dollars for Amtrak this year, as the JFC passed Alternative 1, which increases state payments to the Hiawatha line by more than $5 million for 2011-13. Why the increase? Not low ridership, as the paper points out that "ridership revenue has been greater than expected" over the last 2 years on the Milwaukee-Chicago route, and that WisDOT will save at least half a million in subisdies from the $6.44 million subisdy budgeted for the service. The line will even cost less to run in the upcoming 2 years, as the subsidy is projected to be less than $5 million in each year (compare that to highway maintenance, and it's a drop in the bucket).

So why the extra state funds? Check out Point 8 of the LFB paper. Once the FRA yanked the $800 million high-speed rail project due to Scotty's big mouth, they also told the DOT that the Talgo train facility and maintenance costs wouldn't be covered at 80% as well, leaving the state on the hook for all of it. BRILLIANT!

I'm still waiting for a billboard to go up on I-94 west of Milwaukee that reads "Wish you had the train now?" Because much like a lot of other things with Scott Walker, the more you look into what he's doing, the more foolish and disastrous he and his backers look. See you at the Capitol on Saturday to drive the point home yet again.

Sunday, May 1, 2011

Mifflin Street revelries and reflections

Yesterday was quite a frenetic day in downtown Madison, in addition to the typical Madison Farmer's Market, you had the Crazylegs Run, motorcyclists heading up another well-attended anti-Walker rally at the Capitol, and lastly, tens of thousands at the annual Mifflin Street Block Party.

As a decent Wisconsinite, I dropped by the motorcycle rally for a bit, and grabbed a couple of pops at nearby taverns during a bar crawl that's part of Madison Craft Beer Week. Then made a couple of drop-throughs on Mifflin Street. My first go-round was around 1pm, and the streets were already flooded with people, many well on their way past a good time, but relatively tame with a live DJ stirring people up in a goood way. It reminded me of the Mifflins in my college times in the mid-'90s, with lots of drinking inn the street and people bouncing from house to house. Only difference was we didn't have beer vendors serving tall boys- which comes in handy because you can only get single cans of import beers at downtown liquor stores (really dumb law, by the way, only encourages 30-packs of crap to be bought).

Well, I went back to Mifflin about 3:30, and found people beyond shit-faced. Being in my 30s, I'm used to adult drunk (goofy and stupid but somewhat in-character), don't like but understand college drunk ("I don't know where I am and I'm shooting off my mouth, but I'm having a good time"), and Bourbon Street drunk ("I'm too drunk to say anything and I won't remember this at all"). A lot of these kids were at the Bourbon Street drunk level, and when you're barely at "adult buzzed" level observing this, it goes from the "Cool, carzy time" to "Wow, this is messed up."

That didn't change when I wanded up toward State Street to eventually catch a bus on my way home. Bars were jammed at 4pm, and I had to help a freshman find his way back to the dorms after he was falling off of park benches, losing keys, and stumbling out into Johnson St. I get that these things do happen, because I was that kid a few times when I was his age, but it's still not so much fun to see.

Apparently, it was even worse than drunks I observed having about ten too many, as 20 Mifflanders got taken to detox, and 2 people got stabbed. I note that the two stabbings were in parking lots of houses behind Mifflin Street, which have become this crazy wasteland of bottles, cans, and lots of college students and others trying to stay away from the eyes of security (who were patrolling the streets). This might be the biggest thing to look into changing next year, as those lots seem to be prime places for things to get out of hand with much less of a chance of the perps being stopped in time. The cops in the streets seemed to be handling things OK, and were visible enough to be contacted in case something was going to start breaking out (this helped last year when I saw a guy get decked on Bassett and me and a couple of others flagged down a cop who found the guy and got him sent off). But the behind-the-scenes action in the parking lots and on Dayton and West Washington Streets may have to also be looked at. Costs a bit more money, but may well be worth it.

I don't want to see Mifflin go away, but it's going to have a lot more structure next year, based on Mayor Soglin's comments in the article. I'd like to see some volunteers also intermingle in the crowd, as I think some college-age students don't want to deal with cops out of fear of underage drinking tickets and their general lack of understanding about handling bad situations. It's worth looking into.

Now I'm off to stand in line for an event that also has lots of beer, but none of the mayhem and scary-level drunkenness- the tickets for Great Taste of the Midwest. Maybe this says something about people who drink quality beers over quantity ones- a economical tip that college students would be wise to learn. Wish me luck.