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.

No comments:

Post a Comment