On Saturday we reported that Washington lawmakers were considering an increase in beer taxation as a means to bridge the state’s budget gap. It was little more than a rumor at the time we reported it. Today the Associated Press confirmed that the state Senate has moved a budget-balancing plan over to the House of Representatives in the form of a new tax proposal that includes a significant increase to beer taxes.
The biggest portion of the new Senate Democratic plan raises $90 million by increasing the state sales tax to 6.6 percent from 6.5 percent, but another $58 million comes from an increase to beer taxes. The plan calls for a tax of 50 cents per gallon, which translates to about 43 cents per six-pack. Those numbers apply to the producer and not necessarily to the consumer. According to the A.P. report, “Microbrews, which have a strong following in Washington, would be exempt.”
My sources with the Washington Brewers Guild tell me that they are assuming the line would be drawn at 60,000 barrels produced per year. By definition, a brewery is considered a microbrewery if it produces less than than 60,000 barrels per year. This tax, however, would not be levied on the beer that a brewery produces.
The $58 million figure indicates that the tax would be applied to beer sales/shipments by breweries which not only produce, but ship, large quantities of beer. That means only the larger beer producers, or shippers, would be taxed, not our local, smaller craft breweries.
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Of course, my interpretation of the situation is based on the limited information we have available at this point. I know that people in the craft beer business are worried and are opposed to beer tax increases like this whether they directly impact craft brewers or not.
On the surface, the fact that this tax increase does not apply to our beloved local craft brewers might seem like good news; however, taxes are a one way street. It’s a slippery slope, to use an outworn euphemism. At the very least, this increase makes it easier for them to justify any future beer tax increases. The craft beer industry may not be so lucky next time.
Because beer is discretionary spending, many people (including the governor) believe that this tax increase is worthy of consideration. What they fail to recognize is that beer drinkers already pay more than their share of taxes and further tax increases will negatively impact one of the only growing industries in the state.
You might think that brewers will simply pass the burden of tax increases on to the consumer, however beer drinkers have already been pushed to the brink. The breweries must consider the fact that some consumers might not be willing to swallow a 43 cent per six pack price increase right now and therefore the brewers will not risk pushing away consumers by increasing the purchase price. Likely, the breweries will have to absorb a significant portion of tax increase themselves.
The result is that these tax increases promise to hurt the beer industry. If you are a regular reader of this blog you know that the beer industry in Washington is growing. Jobs are being created. The beer industry should be fostered and not attacked.
Large breweries or small, a new tax on one is an attack on all.
Folks, it is time for us to unleash the hounds. We’ve got numbers, all we have to do is exercise our right to free speech. Please, please call or email your representatives in Olympia – click here to find your representative and send a message.
(http://apps.leg.wa.gov/DistrictFinder/Default.aspx)
Be simple and direct. Tell them that you do not want them to increase any beer taxes. This tax increase harms the brewing industry, which is one of the only growth industries in the state right now. As consumers, we are already being asked to carry more than our share of the burden.
You explained that the proposed tax would only apply to large brewers, not microbrewers. Then you wrote, “Large breweries or small, a new tax on one is an attack on all.” Obviously, that’s not true.
You acknowledged that the “slippery slope” is “an outworn euphemism. It is extremely unlikely that our legislators would extend the tax to our microbreweries–their constituents. So on top of using a shopworn euphemism, you are fear-mongering.
Your leading major brewery lobbyist got out in front by announcing the rumor. He suggested that dedicating the funds to substance abuse prevention and treatment might make it more palatable. Certainly these have been cut and are underfunded. By extension, funds could go toward medical coupons for the Disability Lifeline and for Basic Health.
I posted this fear-mongering rumor at the behest of people I know in the craft beer industry. Any half-truths, misinterpretations, or flat out lies were based on my conversations with them.
Thanks for the information Kendall. We posted an article to replicate your call to the public this morning. You are doing a fantastic job making light of this developing problem.
BB.com
Can you explain your math on how 50 cents a gallon becomes 43 cents for a six-pack? I get 28 cents, not 43 (50 cents / gallon = .39 cents per ounce) times 72 ounces (six 12-ounce cans/bottles) is 28.125 cents… even if you were assuming pint-sized tallboys in that six pack (which isn’t what most people commonly think when they think six pack) in order to juice your numbers, it’s still only 37.5 cents…
I drink plenty of beer, both local microbrews and plenty of PBR, and frankly, I can handle a quarter a six pack. I don’t really see the sky falling here.
Uh, I was told there would be no math? All I know is what I was told and what was in the A.P. report yesterday. Those numbers numbers came directly from the A.P. reports. Maybe the major brewery lobbyist who announced this rumor was really bad at math. I don’t know.
I don’t understand the hate. Sure there’s some fear of a slippery slope, though I find that speculation spurious, but doesn’t this actually help Microbreweries? If PBR costs an extra 28/50/whatever cents, doesn’t that increase the value of Microbrews by comparison? If the price differential goes down between Mass-produced swill and good local craft beer… more people will buy your product.
I’m in general for moderate taxes on discretionary spending items, and this seems a reasonable proposal. Why are you against discouraging price hikes on your competitors and their inferior products. This seems like a massive victory for the craft movement.
Despite what a load and bleating minority may think, not all taxes are inherently evil. Especially not those aimed at devaluing cheap low quality non-locally produced beer and increasing the relative price-competitiveness of our delicious local breweries whom we support.
Figured out the math discrepancy too btw. HT to Publicola: http://www.publicola.net/2010/04/06/beer-and-taxes/
There is already a 26 cents/gallon tax in place, the new proposal would increase it 50 cents to 76 cents/gallon, or 43 cents/6 pack. Nick’s math is accurate for the increase, or what we would notice from this law, being changed by +28 Cents/6 pack.
Once again, all is right in the universe. 🙂
Many of my conservative friends would tell you that I have never met a tax I didn’t like. That being said, I go to the store to buy a pint of ice cream and my total cost out the door is $4.00. I go to the pub to buy a pint of beer. and my total cost out the door is $4.00. What percentage of my ice cream cost was based on taxes? What percentage of my beer cost was based on taxes? Both ice cream and beer can be called discretionary expenses. Are “ice cream people” deserving of tax relief that “beer people” are not? Just an example. I like ice cream, too.
I am very, very happy that so many people are interested in this issue. I hope everyone will educate themselves. I do not pretend to be the ultimate expert, especially when there is math involved. I am very glad people are thinking and talking about this issue.