Monday, April 14, 2008

Politics: Proposed Beer Tax

California Assemblyman Jim Beall Jr. Democrat from San Jose, CA is serving his first term in the California State assembly. Mr Beall, who has spent his entire life in Politics since graduating with a degree in urban planning from San Jose State, has proposed an increase in the tax on beer from 2 cents per bottle or can to 30 cents.

The current price of beer where I shop is from 40 cents to $1.25 per can/bottle, so this would increase prices from 20% to 75%.

Each time I leave California I am surprised by the increase in the price of alcohol, so it doesn't surprise me that someone hit on this as a way to raise revenue. The contrast is especially visible between Oregon and California when purchasing wine and spirits. Baileys costs twice as much in Oregon as it does in CA, and 2-buck chuck wine costs 3 dollars at the Trader Joe's in Oregon.

I suppose that with California's revenue problems it is better to tax items like Alcohol, Tabacco and other non-essentials, but on the face of it this is a stupid proposal.

If a 12-pack of beer costs as much as cheap rum or tequila, which do you think people will purchase? They both have the same amount of Alcohol, but which will people drink faster?

Why wouldn't a tax on wine also be appropriate? Maybe Jim has friends that drink wine but not beer?

Mr. Beall estimates that the bill will raise 2 billion dollars. I assume that is based on the number of 6-packs per year currently sold in California, but how likely is it that consumption stays even if the price increases 25-75%?

By pricing this on a per-serving basis this becomes somewhat of a regressive tax. People who spend $9.00 per six-pack of beer that is 7% alcohol will pay half the taxes on their purchase of someone who purchase a 6 dollar 12-pack of 3.2% beer. Now I realize that rich people drink cheap beer and the working-class doesn't only drink mega-bland beer, but generally your income level will predict which beer you purchase.

This could actually be a mixed blessing for craft breweries, since their beer will be closer in price to the cheap domestics on a percentage basis. Some people may decide to purchase craft beer instead of Coors/Miller/Bud when faced with an increase in price of only 60% instead of 120%.

It really doesn't matter to me personally, because I make my own beer for 50 cents a serving and pay no alcohol taxes at all.

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