Beer Tax

Charlie Papazian of the Examinor has a look at Oregon’s proposed 1,900% increase on the beer tax.  With many states deep in dept, raising odd taxes like this seem to be a golden way to reduce depts.  But often times the unintended consequences of this aren’t fully understood.

Do legislators understand the economics of food and beverage distribution?  I don’t think so.   Let’s take this example:  If the tax on a case of beer is increased by $1 the headlines emphasize “$1 a case increase.”  But that is a misrepresented conclusion.

The system of distribution and retail pricing significantly increase the cost to the beer drinker.   If $1 a case is paid at the brewery, the distributor will typically add 30% (30 cents) and the retail store will typically add another 30% on top of that.   So that’s really $1.69 a case increase to the beer buyer.  That’s still not the entire story.

The estimates are saying that a $0.15 tax increase per pint, which is what Oregon is attempting, would equate to an increase of anywhere from $1-1.50 per pint.  That means that people stop drinking the dank microbrews the state is known for and start drinking PBRs or not going to bars at all.

The tax increase has disaster written all over it.

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