May 3, 2010

On That Whole Beer Tax Increase Thing

Belated, but still worth a mention ...

There was a proposal several weeks ago in the Maryland legislature to dramatically increase the tax on beer, wine and liquor. Fortunately it was defeated but knowing politics the same proposal is likely to return and perhaps even get enacted at some point if folks aren't more informed.

For beer, the tax rate per gallon would have been hiked from $0.09 to an incredible $1.16. Maryland is already a heavily regulated, high-tax state. Mix in the still-sluggish economy and its easy to see where this could have a disastrous effect on the health of the craft beer industry in Maryland.

We're fortunate to be in one of the top craft beer areas in the country, despite all the regulation and barriers to profit. We're not California or Oregon or Colorado but we're not a wasteland like Florida or Alabama, either. However, it wouldn't be too difficult to steadily bleed the craft industry here and bring us closer to the wastelands rather than the promised lands if foolish legislative proposals were to be followed through.

I don't buy the Mom and Pop nostalgia of the craft beer industry, but there is a grain of truth to the image, as most producers, however big or small, are driven more by their passion than profit. This makes everyone not named Bud, Miller and Coors (and their shell brands) more vulnerable than a careless legislator realizes.

This doesn't mean a small tax increase is unreasonable. But it must be small. Maryland last increased its tax on beer in 1972, so its been a relatively stable tax environment for almost 40 years. Perhaps this rate is now outdated and not up with the times and that's a worthy discussion in the legislature.

However, its clear the proposed hike to $1.16/gallon would have given Maryland the dubious distinction of having the highest beer tax in the nation! Next highest is Alaska at $1.07/gallon. The median beer tax in America is just $0.19/gallon.

I've spoken briefly a few times with people from highly regarded craft breweries from outside Maryland that are not doing business here, and almost universally they cite a frustrating dance with the three tier system in place here and sometimes other barriers. The tone I get is that Maryland is just a tough place to bring your beer into. That hasn't stopped many quality craft breweries from doing business here, but it has affected some and that impacts variety and having a more competitive marketplace. For the state they lose potential tax revenues when breweries choose not to sell their product here (and often end up doing so to the frustration of many in neighboring states).

Now throw in a potentially unreasonable tax hike on beer and the business environment here for craft beer could be even more troubled.

Just for comparison's sake I'm listing a few states' per gallon tax rate on beer.

The most famous craft beer states are California, Oregon and Colorado.

California $0.20
Colorado $0.08
Oregon $0.08

And here are Maryland's neighbors. Look at these numbers and try not to think of the Sesame Street 'which one of these is not like the other' skit if Maryland ended up at $1.16. Imagine the outflow of business? Yikes.

Delaware $0.16
Pennsylvania $0.08
Washington D.C. $0.09
Virginia $0.26
West Virginia $0.18

My point?

Maryland should not do what some of its misguided legislators have proposed. The proposed tax increase is punitive and anti-business, so thoroughly steep and outside of how we've been doing business, how our neighbors have been doing business, how the nation as a whole does business and how great beer states do business when it comes to the per gallon tax rate on beer.

There's a worthy discussion to be had on if Maryland needs some kind of reasonable tax hike on beer, but what's proposed doesn't come close to hitting the mark. We need to vote out legislators who are crazy enough to even propose such hikes and potentially cripple a sensitive industry (at the craft end) and the many small businesses involved with it and work with the ones who understand the craft beer environment better and can forcefully speak to its interests.


Alexander D. Mitchell IV said...

Bravo. Well-written, well thought out, concise, and reasonable.

Are you sure you're a blogger? >;-)

John M. said...

"I've spoken briefly a few times with people from highly regarded craft breweries from outside Maryland that are not doing business here, and almost universally they cite a frustrating dance with the three tier system in place here and sometimes other barriers."

I've heard this as well (along with other excuses). I guess what puzzles me is why it is seemingly so difficult for domestic craft breweries to navigate the morass of the 3 tier system in Maryland, but not (apparently) imports.

I travel quite a bit and, while I've found plenty of states with a better selectin of domestic craft beer, there is no place I've visited with a better selection of imports. The stuff I've found on tap and bottle at Max's is literally mind blowing... I can't think of any place in the country that comes even close to their selection.

So if we can get pretty much every rare import that comes into the country, why is there still a problem attracting the likes of Bell's, Founders, Ballast Point, Cigar City, New Holland, Coronado, Hair of the Dog, etc? I just don't get it.


Seconding what Alexander wrote.