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.