Go down to your local party store and you’re likely to see a six pack of Budweiser going for six bucks (or a buck a beer). Go across the street to your neighborhood tavern and you’ll probably pay double. Go to a fancy restaurant and you’re gonna pay triple for that same Bud longneck.
We don’t even blink at that kind of 300 percent markup. That’s business. It’s free-market economics. And merchants are going to charge what the consumers are going to pay.
But talk about raising taxes on beer by amounts consumers would, in all likelihood, never notice or care about and you will hear the beer lobby cry bloody murder. Governor Jennifer Granholm heard a few howls in recent days after reports that she is eyeing a possible beer tax increase.
The Center for Michigan first raised the prospect of increasing Michigan beer taxes in January 2007 during the dawning of the last state budget meltdown. At that time, we called for numerous tax-saving reforms but also called for an honest, blunt, and creative re-examination of the sources of state tax revenue, especially the beer tax.
Here’s why the Michigan beer tax deserves serious scrutiny:
- Michigan’s state budget is on a road to a serious cliff – projected general fund and school aid deficits of about $2.6 billion next year. No doubt, hundreds of millions of dollars in reforms and cuts will be needed to close that gap. But many legislators in both parties acknowledge that some form of tax increase also is likely.
- The last time Michigan adjusted the beer tax was 1966 — and we lowered it. Michigan beer drinkers pay two cents per bottle in tax.
- If Michigan had simply adjusted the 1966 beer tax to inflation over the years, it would result in an additional quarter-billion dollars a year in tax revenue.
- Because the state has long ignored the beer tax as a potential revenue source, 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.
- What would hurt businesses and consumers the most: higher business taxes, higher income taxes, higher sales taxes, or a higher beer tax? Would entrepreneurs and major jobs-providing corporations leave Michigan (or refuse to come here) because of higher beer taxes? Of course not.
Naturally, the Michigan Beer & Wine Wholesalers Association, one of the most powerful and well-funded lobbying groups in the state, is vehemently opposed to these notions.
“Raising beer tax will hurt Michigan businesses, harm economy,” shouts a headline on the beer lobby’s web site. “For one, higher taxes could put a chill on beer sales. The simple law of economics tells us that when sales slow, profits dry up, which translates as less growth and fewer jobs.”
Yet national statistics show very little correlation between beer tax rates and consumption. Twenty states have higher beer taxes than Michigan. Eighteen of those states have higher beer consumption than Michigan.
In a state wracked in budget pain, it’s hard to see the hangover from a beer tax increase.
9 Comments
How much revenue could a one cent per bottle increase generate? Bet no one would notice the cost increase.
I find it disturbing that a discussion would ask why not raise taxes, and the first response would agree.
A point was made that the tax should have kept up with inflation. Taxes Always keep up with yearly inflation except in any year they are raised or lower. A $3.00 beer at 10% generates a 30 cent tax. Add 3% inflation, and a $3.09 beer generates a 31 cent tax.
In reality, that beer probably stays a $3.00 for several years, before going up to $3.50. That would then generate a 35 cent tax.
I’m a beer drinker and I say raise the tax by 20% and it won’t change my consumption. This state needs the $$$.
This is what we get when we cowtow to special interest groups. Beer has been a sacred cow for far too long. We taxed most people out of the addiction of smoking. The increased beer tax would create more incentives by having less drunk kids, less alcohol related problems, less traffic deaths from drunk driving, etc. The beer and wine wholesalers have gotten way too big and need to be shut down before they are running our State. Oh wait; they already are.
Jealous people are every where, what these people can not get on their own, they advocate for politicians to do,to take from others and give to them. They are envious of others too, so they support higher taxes, their life is not as successful as they want it to be so they cheer for the politicians to take and take and take.
I agree this particular tax is long overdue to be raised.
But you have to give their lobbyists credit for stopping all past tax increases… now THAT’s effective lobbying!
Sounds like a reasonable tax increase. As a beer drinker in a state that is in serious financial trouble, hasn’t raised the tax in 35 years, and is proposing a tax increase that is virtually invisible. It should be considered. Will it seriously impact beer sales? I seriously doubt it. The state has bigger fish to fry. If they raised the tax to 25¢ per six pack or $1 per case, would that be exorbitant? Does it unfairly punish those who drink beer? If it enrages a beer drinker, then switch to wine or quit. The above example of a restaurant price is good. A tax increase would impact craft beers more than the common swill, because they typically cost more to begin with. Still,for pennies on the bottle, it’s a relatively benign tax. I would rather all our taxes be lowered, but I’m not holding my breath for that to happen.
As an owner of a tavern in Northern Michigan, I feel I need to comment on the tax increase on beer. First of all I am against any tax increase. We as consumers have to tighten our belt when times get tough. We cannot pull extra money out of thin air. We make due with what our income is.
Furthermore, the small businesses in Michigan are getting taxed to death as it is. The increase in minimun, the gas increased gas prices cause suppliers to raise there prices, insurance rates go up every year, Small Business tax, unemployment tax, sales tax. ect. I could go on and on, it is not easy to operate a business in Michigan when 25 to 30% of all money generated goes to pay taxes. WE NEED LESS TAX, NOT MORE. The State needs to cut spending not look for ways to increase it.
With many consumer based taxes going up, why is beer a sacred cow in Lansing? If we can conquer the tobacco lobby, bring down the all powerful automotive lobby, discuss radical health care changes in the State that buck the almighty teachers and other state employee unions, taking on the beer lobby should be childs play. I can think of no reason why beer should not be taxed at an equitable rate.