Commentary: Pass the Beer Tax Reform Act

Friday, April 5, 2013 at 12:30am
040513 Beer topper.jpg

 

Linus Hall is not an unreasonable man.

The man behind Yazoo Beer sat across the table from me and let me pepper him with questions about the legislation he and the rest of the brewing establishment are behind, the Beer Tax Reform Act of 2013.

What emerged from the conversation was an infuriating picture of how taxes are assessed on beer here in Tennessee. Instead of being levied on the volume he produces, Hall and others are taxed based on price, leading one of the most tax-averse places in the country to become the highest taxing beer state in America.

You remember economies of scale from high school, don't you? When a company manufactures things in higher and higher quantities, generally speaking they're able to save money because the cost of production goes down. Maybe they're buying resources in bulk. Maybe the labor costs are cheaper. In beer terms, scale means it costs the Budweisers and Millers of the world less to make their beer than Hall and other craft brewers.

But instead of taxing beer by the barrel — like 48 other states — Tennessee taxes on what it's sold for. So when the market sets the price at $7 for a six-pack, smaller brewers make less. Substantially less. So much less, in fact, that Hall can produce a case of Yazoo Pale Ale here in Nashville and ship it to the Krogers in Vicksburg, Miss., and still make $1 more on it, even after he's paid the truck to drive it down there.

Mississippi charges $13.23 on a barrel of beer. Arkansas? $7.51. Georgia? $30.73. Tennessee is far and away No. 1 and it isn't even close.

The proposed taxes under the Beer Tax Reform Act, so that they're revenue neutral (and don't cost cities or counties any money), would charge $39.89 on a barrel of beer and Tennessee would still be the highest tax state in the country. But by charging on volume, Hall would save almost $20 per barrel of beer, because the current structure pushes his taxes to a staggering $58 per barrel.

The current tax punishes everyone. It cheats fans of craft beer by preventing any number of beers from ever selling in Tennessee, including award-winning brands like Bells and Founders (which, incidentally, is available in Alabama and Georgia — so they're driving from Michigan through Tennessee to sell their product). When a great beer like Dogfish Head became popular several years ago, the demand for it was such that the company couldn't keep up, so they pulled out of several states. One of the first places they left? Tennessee, where the ridiculous structure made the decision easy for them.

But most of all it hurts brewers like Yazoo and Jackalope, two local companies which make great beer but have difficulty expanding because of a crushing tax.

The Reform Act has sailed through a few committees on Capitol Hill, so far, but this is a state where crazy things happen in the legislature all the time. Remember, we were promised that the wine-in-grocery stores bill would at least get a vote by the full House and Senate, and that didn't happen.

It's time to start normalizing some of the byzantine laws on alcohol in Tennessee. Helping our craft brewing industry — and consumers — would be a good place to start. 

8 Comments on this post:

By: Libertine on 4/5/13 at 4:37

I will drink to that! How about just eliminate the sin tax on beer altogether?

By: Kosh III on 4/5/13 at 7:02

Last year the GOP kept yammering about how government regulations were hampering "job creators."

Now let them prove; pass this bill!

By: girliegirl on 4/5/13 at 7:21

Add to this scenario all the Home Brewers......also known as "tax evaders" because that's what they're doing....evading those beer taxes that everyone else pays.

By: Rasputin72 on 4/5/13 at 7:27

The tax on beer was here before the micro brewers. The loss of revenue to help a few micro brewers is not something legislators find comforting. Taxation loss must be made up by taxation gain.

By: Kosh III on 4/5/13 at 8:02

Can't you read!! No tax cut or increase.

"so that they're revenue neutral"

By: Rasputin72 on 4/5/13 at 3:19

Kosh111....I appreciate your pointing out the term revenue neutral. I did not consider the selling points by the micro brewers who are promoting this bill as being revenue neutral in the practical sense.

It appears to me that the mathmatics work against beer drinker. The Budweisers and Millers mathmatically have to pay more if the micro brewers pay less. Mathmatically since at least 75 to 80 %of the beer is sold by the majors I see in the revenue neutral formula the beer drinker of name brand beers picking up the portion of the beer tax that is given to the micro brewer.

Now the details which are in the revenue neutral do not indicate the specifics of how thisworks.

You certainly have every right to ppint this out. You also may have opened the bill up formore consideration.

By: Jazzpa on 4/8/13 at 6:03

Rasputin72

Ever wonder why none of the "big brand" breweries are NOT in TN? It is the tax rate plain and simple. Everyone (brewery) that sells in TN pays the same RATE, the total amount is based on how much they sell. To say the big breweries pay more is correct if you ONLY look at the bottom line numbers.

By: localboy on 4/9/13 at 8:47

Isn't there a Budweiser brewery in Memphis? Or is that Miller/Coors?