I'm in the mood to write about something a bit lighter to end the weekend that officially starts Summer. And that's our state's beer tax.
What tipped this off was an intriguing article in today's Cap Times going over declining beer tax collections in the state. However, the judgment that the article makes is that this is an indication that the state's beer industry has been hit by the recession, and I don't see it that way at all.
First of all, as mentioned in the Legislative Fiscal Bureau's report on alcohol and cigarette taxes (fun reading if you want to learn about these things, since it goes over laws in other states), the state's beer tax is based on volume (barrels/gallons), not price. And this has been fixed at $2 a barrell (6.5 cents a gallon) since 1969, making Wisconsin's beer tax the 3rd-lowest in America. So when you see the beer tax collection numbers, it shows that the amount of beer drank in Wisconsin, which was a relatively steady number over the last decade, until it declined nearly 6 percent in the last 2 years tracked.
Beer tax collections, 2001-2011
2001-02- $9.60 million
2002-03- $9.52 million
2003-04- $9.60 million
2004-05- $9.77 million
2005-06- $9.76 million
2006-07- $9.53 million
2007-08- $9.62 million
2008-09- $9.91 million
2009-10- $9.61 million
2010-11- $9.30 million
So volumes are definitely down, but which beers are being drunk also seems to be different. In the same time period that total beer consumption has declined in Wisconsin, craft brewing has increased as a share of business nationwide. The Brewers' Association reports that the craft brewing industry was up 13% in 2011, and 26% between 2009 and 2011, while overall U.S. beer sales were down 1.3% in 2011, and down 2.5% from 2009-2011. It is reasonable to assume Wisconsin was part of the nationwide trend of more craft beer sales, as Wisconsin was 7th among all U.S. states with 72 breweries in 2010 (despite being 20th in population), and was 9th in the U.S. for breweries per capita, along with being Number 1 per capita in the Midwest. And Wisconsin craft brewers Minhas, New Glarus and Point are among the top 50 brewers by volume, along with Number 2 Miller/Coors and Number 3 Pabst.
So perhaps the drop in beer tax collections is a reflection of more Wisconsinites choosing to buy smaller amounts of craft beers instead of shelling out for cheap 30-packs of High Life (I'm enjoying a Pull Chain Ale from Milwaukee Brewing as I wrtite this, so I'm doing my part). Which leads to a suggestion that some may find radical.
Double the beer tax in Wisconsin. Hell, raise it to $5 a barrell instead of 2.
Not that this would be a huge revenue-raiser for the state. The amount the beer tax currently raises is only 0.07% of all taxes in the state. But even raising the beer tax to $5 a barrell would still keep it well below the level of inflation of the last 43 years, as the inflation calculator shows that $2 a barrell in 1969 would equal $11.76 today. $5 would only be half that amount. In 2011, if the same amount of beer was drunk, raising the beer tax to $5 would have meant nearly another $14 million in revenues. And if you assume that 80% of the extra beer tax gets passed along to consumers in the form of higher prices (and even that is probably low, do you really think we're going to slow down the amount that we're drinking?), the 5% sales tax that would be paid due to the extra beer tax would be in the neighborhood of another $700,000.
More importantly, this would reduce some of the price advantage many macrobrewers would have over our state's growing microbrew industry. A $5 a barrell tax translates to just over 16 cents a gallon, or about 9 cents a 6-pack or 36 cents a case. Not that this is a whole lot, but then when you remember state law allows a 50% tax credit on brewers who make less than 300,000 barrells a year (which is basically anyone not named Miller or Pabst), half of that 36 cents a case would go right back to the microbrewers. And at $5 a barrell, Wisconsin would still be below att of its neighbors in the Midwest except for Minnesota (which is $4.60 a barrell), so there would be no advantage to going over the border to pay lower taxes.
Sure, the brewmasters may not like the cosmetics of doing so, but I think in the long run, this would be a help to them as a good way to protect our growing beer-making industry. And at the same time it would kick in a little more revenue into the state coffers. So yes, I'll say it on this Memorial Day. RAISE THE BEER TAX!