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Wednesday, October 8, 2008

"I'm no mathematician..."

A huge thank you to Harry Schumacher at Beer Business Daily for pointing out what anyone who ever made it through an intro business admin course in high school (I did, and thank you too, Mr. Bassett) should be able to figure out: higher excise taxes mean lower sales...which means lower tax income.

Unfortunately, the nimrods at the California Board of Equalization just don't get it. They're the people who collect sales and excise taxes (and isn't that a great name for such an agency?), and back in June they put forth a ruling that all beer ("but not politically connected wine," as Schumacher points out) would be considered a spirit until proven otherwise. This was because New Dry crazies at PIRE and the Marin Institute convinced them that malternatives (Smirnoff Ice and its ilk) were still being made with distilled alcohol...which meant they could be taxed at the spirits rate of $3.30 a gallon, instead of the beer rate of $0.20 per gallon. If malternatives were taxed at liquor rates, the New Drys whispered in the BOE's ear, think of all the tax revenue you'd rake in!

The hypocrisy boggles the mind: these are the same people who preach that higher taxes on beer will drive consumption down, and here they are telling the saps at the BOE that higher taxes will bring in more money. Because that is, after all, what this is really all about. The money.

What puts the icing on this three-layer dumbass cake is that the BOE...well, let's let Harry tell it.

The BOE, chaired by Dr. Judy Chu, is apparently unaware of the realities of what they have done, and they have asked the state (which is on the brink of bankrupcty) for $1.16 million to add nearly 6 full time employees to administer and enforce the new tax. The BOE has predicted that they will generate an extra $38 million in new taxes due to the reclassification of PABs. Apparently, as unbelievable as this sounds, nobody has seen fit to apprise Dr. Chu that increasing a tax on a price-sensitive beverage by 1,660% will diminish demand for that product -- to the tune of killing it entirely -- unless the producers of those PABs reformulate them to fit the definition of beer [which, almost uniformly, they have: they must have taken that high school course. Which begs the what area does Dr. Chu have her doctorate?]. I'm no mathematician, but $3.30 times 0 gallons equals zero dollars in new tax revenues -- which is a far cry from $38 million.

Not just high-handed, not just gullible...they're stupid, too. Unlike the brewers, who have already jumped through this dope-hoop: Schumacher notes that the state already has over 100 pages of a single-spaced list of brewers who've "proven" that their beer.

And I thought Pennsylvania was ass-backwards on booze.


The American Don said...

Homebrew, don't ya really love it

Homebrew, can't get nuff of it

They know craft beerers will not stop drinking beer. I do wonder why the Mega Brewers didn't kick up some lobbying to stop this BS.

Lew Bryson said...

I think the only megabrewer still in it is A-B, and they were more focused on getting their expanded trinkets law passed in California.