It’s not exactly a bar brawl, but the president of the New Holland Brewing Company exchanged passionate messages this week regarding the Center’s recent newsletter post about the beer tax.
You might enjoy the discussion…
FROM BRETT VANDERKAMP, PRESIDENT AND CHIEF IMAGINATION OFFICER, NEW HOLLAND BREWING COMPANY:
First, I am not sure who crafted this blog, but I can only assume it must be an official position as the author is listed as “center.” It is also unfortunate that you would make light of such a serious issue that faces a growing sector of business in Michigan by inferring that we are paranoid over potential threats to our businesses. I believe it calls into question the seriousness and credibility of your organization.
Further, your over simplification of the tax issue shows your ignorance to the plight of the small brewer in Michigan. To suggest that because you go to a local brewery and are willing to pay more for their product means that all Michiganders are willing to pay more is beyond any type of scientific extrapolation. I have to wonder how many Michigan brewers you talked with that were supportive of an increase in the state’s excise beer tax. I can reasonably assume that the answer would be “none.”
The fact remains that small brewers are strapped. We face rising costs on all fronts. In fact, in 2009 we saw an average increase in our hop pricing alone of over 50%. Yet in spite of these challenges we continue to make grow and continue to educate the consumer as to why they should choose our local Michigan products over products that are made overseas or from another state. (I am trusting that the “Center” has an understanding of why buying local helps Michigan workers and families.) It is beyond me why a “Center for Michigan” would want to put a further burden on businesses that are the heart and the “center” of Michigan communities. Our family owned manufacturing businesses are models for what Michigan needs now. We should be working to remove any bureaucratic obstacles that impede on our success – not put up more barriers!
For the reasons stated above, I am officially removing my support for your “think tank.” Lest you think that this is just an offhand remark, it should be noted that I have participated in and even hosted a gathering of likeminded small business leaders at my establishment for an official “Center for Michigan” survey and presentation.
In closing, there are many factors that contribute to a healthy small brewery scene and Michigan is fortunate to have many of those factors in our favor. While Michigan has an average beer tax when compared to the national average, it does in fact suffer a competitive disadvantage when compared to all three of our neighboring states, all of which have a tax that is less than Michigan’s. If we really wanted to help Michigan small businesses compete, lowering the Michigan beer excise tax would be a great way to create jobs and revenue for its citizens.
Sincerely,
Brett VanderKamp
President and “Chief Imagination Officer”
New Holland Brewing Company
RESPONSE FROM JOHN BEBOW, EXECUTIVE DIRECTOR, THE CENTER FOR MICHIGAN:
Brett,
It’s good to engage in debate with you on the beer tax. I’m the author of the post you reference.
As I said in the post, I’m a big fan of Michigan microbrews.
But, boy, do I scratch my head at the notion that increased beer taxes would hurt the Michigan economy…
Compare the beer industry’s current situation to the 1960s when Michigan’s beer tax was established at its current rates. Since then, that tax has never been indexed to inflation. Due to the time value of money, inflation has eroded the beer tax nearly to the point of irrelevance. A wide variety of other taxes are based on percentages and are thus naturally indexed to inflation. Why should beer be an exception? Beer accounts for an ever-shrinking portion of state tax revenues – and other revenue sources make up the difference. In 1966, Michigan collected $15.50 in sales tax for every dollar in beer tax. In 2007, Michigan collected $129 in sales tax for every dollar in beer tax. The Center for Michigan advocates for a wide range of reforms we hear citizens call for in Community Conversations like the one you participated in. But, at the end of the day, we all also have to recognize that there is a price for public services – it’s hard to see how school teachers, police officers, road pavers, sewer builders, etc. would ever work for free. Every interest group in the state wants to reduce its tax burden. So, who should pay?
Compare the beer industry’s situation to other “sin” taxes like cigarettes. Cigarette taxes are like crack cocaine for lawmakers and governors who have returned again and again to the potential of higher revenues by taxing smokes. Yet look at the profits of tobacco giant Philip Morris, which has a 40 percent operating margin, 18 percent return on assets, 65 percent return on equity and in its last year cleared $6.5 billion in net profits. It’s hard to believe brewers would eat the cost of beer taxes any more than Philip Morris has eaten the cost of cigarette taxes.
And where is the correlation between beer tax rates and beer consumption? There certainly doesn’t appear to be a correlation in national statistics from the brewing industry. If you study that chart, it might be worth asking another question with arguably much more profit implication on Michigan brewers than taxation… why does Michigan rank 40th among the states in beer consumption and what can you do to change THAT ranking? It’s hard to believe you’re going to change it through tax policy.
A beer tax, if fairly collected, could impact all beers equally. Hard to see how that puts any particular local or national beer or brewer at a market disadvantage. If local brewers are inherently local, help me understand the relevance of the beer tax in Indiana or Ohio to a brewer in Holland or Traverse City or Bay City. Are beer drinkers really so discriminating that they’d spend several dollars in gasoline to drive across state lines for a mug ‘o suds that’s a nickel, dime, or quarter cheaper?
I’m sorry to hear the Center for Michigan will lose your support over this issue. We’re far from a one-issue group. And I thank you for participating in Community Conversations which are design to foster dialogue statewide about Michigan’s many fiscal challenges (on both the taxing and spending sides).
The next time I’m in Holland I’ll stop in for a short mug – and I’d be glad to pay more in taxes for the privilege.
Thanks for taking the time away from the massive task of running your own business to engage in the discussion about Michigan’s future.
Sincerely,
John Bebow
Executive Director
The Center for Michigan
One Comment
The foremost reason or issue when lawmakers tax tobacco products over and over is to cover the societal cost of their use. Now if one were to use that arguement or logic in the alcohol debate, would we find a new correlation? Ask any police officer, jailer, court employee, judge, social worker, school, women’s advocacy group, children’s advocacy group, just to name a very few, about the ills and cost for alcohol usage. Now add the cost in the form of deaths and injuries on the highways and streets along with incidents in industry, homes, and public settings. The carnage is horrendous weekly. Ask the insurance industry for their comparison of claims of tobacco versus alcohol. Okay, the picture here becomes quite clear. Back to the legislative comparison. If the same metrics used for compensating society for tobacco use were to be applied to alcoholic beverages the tax could supercede the cost of the product. One has to wonder why the “beer tax” has been so low for so long. Perhaps the alcohol providing industries have an open check book when it comes to funds for lobbying. That doesn’t seem to effect their bottom line. A cost is a cost. There is much hypocracy here and even a sense of whining from an industry that is struggling no more than any other in this state. It all depends on whose ox is gored and where one decides to expend their funds. I am in no way an advocate of taxation, but when confronted with the numbers presented in this debate, the disparity borders on the rediculus. The beer industry would have been better served with silence as the debate has opened a can of worms for them in the future.