08 Jul 2009 @ 2:27 PM 
 

The North Carolina Beer Tax.

 

Local issue today, friends. I think this can probably apply to most places if it has to, but my focus today is the great state of North Carolina.

Dear North Carolina Legislators and Gov. Bev Perdue,

Please stop. There’s been a lot of talk about how to fix the state budget. In fact, we’re a week overdue on a budget, anyway, so this seems like a pressing issue. People keep talking about what to tax to fix this budget shortfall. I’d prefer that the answer be “not beer.” I think I’d also like to say, “Don’t furlough me again.” but really? This is about beer.

I know. Sin Taxes are popular and easy: Tax the things that Portion A of the population fervently believes is bad for Portion B of the population. In doing so, not only will you make money on people who are not Portion A, but it will act as a deterrent for Portion B to buy those evil products. Portion A loves it, and they’re very vocal and often have money, which kind of makes me wonder why we aren’t taxing them.

Just a couple of things:

1) If you’re only taxing a portion of the population, it’s not a very effective tax in terms of income.
2) If you’re using tax as a deterrent on consumption, you’re not planning on making any money in the long run, as the less people buy the evil products, the less money you will make.

Sin Tax seems silly. I’d much rather see a Fat Tax. We know that our health care system is in financial crisis. We know that there’s an obesity epidemic. We know that obesity is a predictor in heart disease, arthritis, diabetes, and early mortality across the board. We know what makes people fat (sugar and (amazingly) fat), so tax that if you want a tax deterrent. I’ve mentioned before that I think that a tax on products containing High Fructose Corn Syrup would be much smarter than a tax on beer, and I still do. But I’m not here to argue that.

No, I’m going to assume, that despite the wonderful efforts of the good people behind Stop the NC Beer Tax (dot com) that you’re going to throw your better judgment to the wind and raise taxes on beer and wine. So instead, I’m going to tell you how to do it.

Consider for a moment that a city in your fair state was recently voted co-Beer City, USA in a poll run by President of the Brewers Association. Consider that, as of this summer, there are ~40 craft breweries either in operation or in the middle of starting up. These are all small businesses contributing to your local economy. They’re creating jobs in communities across the state. Consider that a rise in beer tax will hurt these small businesses – especially the startups – the most.

But hey.. you’re going to tax beer. Portion A must be satisfied. Please consider the following two-part plan:

1) Increase tax per barrel of beer manufactured inside the state of North Carolina by any brewery manufacturing over 15,000 barrels of beer annually (ie – Regional Breweries and larger). Leave the small business out of it.

2) Increase tax per case of any beer imported to the state of North Carolina by any brewery manufacturing over 15,000 barrels of beer annually. Leave your neighbors’ small business out of it, too.

Fact is this: Something like 99% of the beer consumed inside the state of North Carolina is manufactured by a regional brewery or larger – a significant portion of that beer is imported IN to the state of North Carolina. Those breweries are making money in states Other Than Yours – especially the macrobreweries – but most of the small breweries in the state aren’t. They’re distributing locally, often by-hand, in their own communities. They’re getting the tax pinch on every purchase of their product, not just the ones that happen in-state. So how are these small breweries going to deal with the fact that they have a significantly higher cost of operation and, if the Sin Tax works, poorer sales? Will they lay off workers? Will they close doors altogether? In Beer City, USA?

The way to turn the corner on this economic downturn begins and ends with the small business. Don’t hurt them more just because Sin Tax is easy. Help them, and reap the benefits. Maybe take yourself out for a good local beer to celebrate a good deed done for the day, and then ask yourself:

Why are we taxing beer in the first place? Sin Tax is cheap and misguided. There are a million better ways to save money and generate revenue that don’t actively hurt small businesses in our state while at the same time, allowing us all to continue to treat ourselves to a an occasional affordable luxury.

Cheers,
Erik L. Myers,
Self-Righteous Beer Evangelist

If you’re inside North Carolina, please take the time to go Stop the Beer Tax.

Tags Tags: ,
Categories: distribution, industry, RDU, taxation
Posted By: erik
Last Edit: 08 Jul 2009 @ 02 31 PM

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Responses to this post » (7 Total)

 
  1. Sarah says:

    You’ve hit the nail on the head, as far as sin taxes go. Telling a population that what they’re buying is evil, yet depending on those purchases for your budget is hypocritical and wrong-headed. I agree with the tax thing, too. After all, we have a graduated income tax because we recognize that some people make more than others and it would hurt them (and the country) to tax them blind. Why shouldn’t it be the same for companies?

  2. TripleP says:

    aren’t microbreweries already taxed less than the large breweries because of the tax brackets? Also when have sin taxes reduced consumption? People won’t stop drinking or smoking ;-p unfortunately they may spend less money on important things, like say their children, when sin taxes go up 🙁 but the government will get more money! As a last thing: increasing taxes on non essentials is not so bad compared to increasing taxes on other things as people with less money should get impacted less. I like your eat well tax idea!

  3. Adam says:

    Hi, your local irritating economist here. I can agree with most of what you say here, and lord knows I would like my beer as cheap as possible. But I must point out that your argument #2 (cutting consumption is inconsistent with revenue-generation) is false. The whole reason you tax something like beer is that Portion B REALLY likes beer. They don’t like taxes, so they’ll consume less beer. But the demand for beer is such that (and this is especially true in down economies, studies show) people won’t leave off beer consumption in sufficient quantities to reduce tax revenue. I.e., beer is a price-inelastic good. And as long as they only want to get revenue to recover from recessionary budget downfalls, it’s probably a good way to make money in the short run.

    But like you say, it’s also a good way to run smaller, more marginal producers out of business, so that’s a good angle to work. (And in response to the above comment, beer taxes are presumably ad valorem and affect small brewers, per sale, the same as large – they’re not income taxes)

  4. erik says:

    I like having a local irritating economist. That’s awesome.

    I suppose my backwards point here was actually that Sin Tax doesn’t actually reduce consumption – but if it did, it wouldn’t actually be a good model for taxation. What you’re really doing is just taxing the piss out of Portion B and Portion A gets off free because they’re all goodie-two-shoes.

    So, the problem with raising excise tax for short term gain, IMHO, is that I’m not convinced it will ever be reduced again once that gain is achieved.

  5. Sarah says:

    Drat you, Adam, and your economist’s logic! You’re totally right.

  6. Jane says:

    Heck, for several hundred years North Carolina’s economy was mostly based on tobacco farming. We’re used to profiting from sin! And cancer!

    TBH I’m not sure whether tobacco is very heavily taxed in NC though; it may be Tarheels as farm owners who profit from tobacco-related sinning as opposed to the state govt.

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