You love the blog, so subscribe to the Beervana Podcast on iTunes or Soundcloud today!

Thursday, February 26, 2009

Fundamentally Dishonest

I will use one of my allotted beer tax slots to highlight a particularly dishonest and misleading component of the backers' PR push. It has been successful enough that reporters now regularly parrot the talking point as if it's a part of the public policy under consideration. To wit:
The present tax translates into less than a penny per 12-ounce beer. It's about the lowest in the country, unchanged for 32 years.

The higher tax would tack a 15-cent tax on 12 ounces, a 20-cent tax on a pint.

That comes from an article in Thursday's Oregonian--though the calculation of the tax in terms of cost to the customer on a per-glass basis is ubiquitous. It's pure spin, and it's absolutely neither fact nor a part of the policy.
  1. The bill proposes an excise tax on beer at the production side, not a retail tax. No one has any idea how much the excise tax will affect beer prices.
  2. Backers use this framing device to minimize the perceived effect of the tax. This is political spin, not fact. Rather, it seeks to obscure fact. Some people use a different word for language that obscures fact.
  3. Pinning the tax to a phony per-glass cost has the additional advantage of hiding who actually pays the tax. Consumers are asked to think they're picking up a very modest cost to pay for a large public benefit. Great politics, pure BS.
If any reporters happen to stumble onto this post, recognize that by identifying the costs using the spin of the beer-tax proponents, you are participating in the politics of the debate. That's not reporters' job, and my guess is the ones doing it aren't aware of the mistake.


  1. I might actually be OK with a modest tax on ALL alcohol sales at the retail level. Too bad that isn't the proposal.

  2. Right on, Joe.

    Another way to fairly tax brewers: fix the Oregon corporate tax. The O reported that 31 corporations with profits over $1M paid the $10 (sic) minimum tax in 2006. Ten dollars?!?! And you want to put a $25/keg tax on beer. Get real.

  3. I think you raise an excellent point. Distributors and retailers have margin targets, usually 35-50%. So the cost to the consumer will actually be 30-60 cents per 12 ounce serving.

  4. Thank you for getting people clear on this, Jeff. One thing that I've realized is that the non-businessperson often seems to confuse "margin" with "markup". A margin is a percentage of profit; a markup is a numerical addition.

    All business ventures must earn a margin -- a percentage return on investment that makes it worth their while to risk the money required to make the good or do the service. Because in the end, if you can't make more money at the business than you could have made by investing it -- by doing nothing, creating nothing -- there is no business justification for being in business. That's not sexy or inspiring. But it is reality.

    The pro-tax proponents suggest that we can all just mark up our product by $XX amount and "pass it up". This ignores two key facts: a) see above, and b) people tend to buy less of nearly anything when it costs more money. So basically they're suggesting that we make money less per keg and sell fewer kegs. Pretty easy to understand why we're crying foul about that.

    Another clear way to look at it: the proposed tax will increase a brewery's total costs of beer production for beer sold in Oregon by at least 30 percent, and, for some, over 50 percent, (depends on how efficient the brewer is and what they make). Shouldn't any reasonable person expect an increase in cost of production to be reflected similarly at the tap? To suggest otherwise is, in my opinion, more than foolhardy. It's egregious.

    Thanks for the space,

    Charlie Devereux
    Double Mountain Brewery