So why were Wisconsinites buying so much more booze in FY 2021?

When the Wisconsin Department of Revenue released the state’s year-end tax revenues for the 2021 Fiscal Year, the numbers were even higher than expected. And while the $2 billion increase in General Fund taxes was mostly due to a big jump in corporate taxes along with solid increases in income and sales taxes, there was another area that also brought in more revenue in Wisconsin in FY 21.

Alcohol taxes collected in Wisconsin jumped nearly 17% in the fiscal year that ended June 30, according to state tax revenue data analyzed by the nonpartisan Wisconsin Policy Forum.

That’s the largest jump since 1972, when the drinking age was lowered to 18 for a little more than a decade.

Data from the state Department of Administration and Legislative Fiscal Bureau show Wisconsin’s excise tax revenue on alcoholic beverage sales are projected to reach about $73.8 million, a 16.6% increase from the $63.3 million collected in the previous fiscal year.

So where did that come from? Let’s start by taking a step back and going over how we collect alcohol taxes in Wisconsin.

A quick check of the Legislative Fiscal Bureau’s Informational Paper about various “vice taxes” in Wisconsin reveals that liquor, wine, and beer taxes are considered occupational taxes . That means they are generally paid by distributors and direct shippers of the product, instead of being paid by the consumer and collected by the seller (like a sales tax is).

All of the booze taxes in Wisconsin are based on volume, and not price of the product. And none of these taxes have been changed since lower-alcohol hard cider was split off from wine in 1997, which indicates that the jump in taxes is the result of more (volume of) product being sold.

And it’s not just because the COVID-related lockdowns of March-May 2020 cut sales to bars and restaurants, as the FY 2020 numbers for all types of alcohol were not much different than the trend in prior years. Fiscal Year 2021 just had that many more purchases.

In their analysis of the big increase in alcohol sales/taxes, the Wisconsin Policy Forum looked at information from the Wisconsin Department of Revenue, and says the increases in alcohol sales started as most of Wisconsin was locked down when COVID first broke out.

We analyzed the DOR monthly excise tax revenue totals since the onset of the pandemic relative to the same months a year earlier. They show an initial surge of increased alcohol tax revenues in April 2020, much more modest increases in the following months, followed by larger increases in the late summer and early fall. Monthly revenues saw sustained but smaller year-over-year increases from November through February before surging again to end the fiscal year.

Under this hypothesis, Wisconsinites were stocking up for consumption at home in the early days of the COVID World, and likely continued in that trend for the rest of 2020 and early 2021. We also saw strong growth in outdoor tourism last year, as people looked for relatively isolated activities during a pandemic and Wisconsin’s natural beauty was a fit, well within driving distance for people in larger Midwestern cities.

As weather warmed in 2020 and more bars and restaurants were able to serve, those businesses saw a need to replace older product that they may not have used in the Spring and Summer, and restocked as well (I recall the Great Dane having a huge sale of beers during the Spring of 2020 they were otherwise going to throw away).

Then after we got through the COVID Winter (where there was often little to do other than to watch TV and drink at home), vaccinations started in large force right as weather was warming again, giving two boosts to restaurants and bars. This increased the volume purchased by those businesses compared to prior months, which explains the big revenue numbers in May (reflecting the sales in April).

And perhaps there is something to be said about the COVID World making people crazier, and some turning to booze more to cope (I am not one of them, and am likely not drinking enough in 2021, frankly). But we also may see a reversion to trend in Fiscal Year 2022. July 2021’s volume of taxable beer sales were 20% below July 2020’s, so let’s see if that decline/settling continues when we see the 1st 3 months of Wisconsin revenues in about a month.