Will the feds raise beer taxes? Industry holds breath, waits, wonders what Anheuser-Busch InBev would do
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Sure, they’re a little arcane and obscure, those closed-door negotiations in the U.S. Congress over how to pay for a proposed health care overhaul. But you can bet that the beer industry is paying attention. You should too.
Will federal lawmakers raise beer taxes to pay for health care and close a massive budget deficit? The answer to that question, brewers believe, will determine how much beer Americans drink in the future. And it could determine whether Anheuser-Busch InBev keeps all of its U.S. breweries open.
Up until the beginning of May, state-level issues, such as ideas for state-level tax increases, were the pressing issues for brewers. But now, the federal threat is the biggest one out there.
A Senate committee recently mulled a 150 percent increase in federal beer taxes. Anti-alcohol activists had recommended an even larger increase - a tripling.
Of course, Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, has said those proposals are “on life support.” As far as we know, no one from the powerful committee has officially endorsed raising taxes on beer. That leaves the beer industry is in a wait-and-see mode. But folks are not resting easy.
“There’s a lot of anxiety out there,” Charlie Papazian, president of the Brewers Association, told Lager Heads. “And if there isn’t, there should be.” The Brewers Association represents small breweries.
St. Louis - and 11 other U.S. cities that host Anheuser-Busch breweries - might be well-advised to pay attention. When InBev bought Anheuser-Busch last year, it left itself a contingency that could allow it to close breweries. Guess what that was? Right: “New or increased federal or state excise taxes.”
The threat that Anheuser-Busch InBev would close plants if taxes rise dramatically is “not just hypothetical or speculative,” said Benj Steinman, editor and publisher of Beer Marketer’s Insights. “It’s a possibility.”
Right now, the beer industry’s talking points in Congress are “really all about jobs,” said one industry source. Brewers plan to make the case that a tax increase would destroy a bunch of jobs at breweries. (Interestingly, we are told that 90 percent of the jobs at big breweries are unionized. You learn something every day.)
By one estimate, the beer industry could suffer a drop-off of “at least” 100,000 jobs in brewing, wholesaling and related industries if taxes are tripled.
That argument is based on the idea that some brewers would raise prices, which would eventually reduce sales and lead to layoffs. Or, some brewers would try to swallow the tax without raising prices. That would reduce profits…and lead to layoffs.
“The more (taxes) go up, the more it hurts,” said Steinman. “That freaks the industry out.”
Lager Heads is told that, when the federal excise tax went up in 1991, beer volumes dropped by about 2.8 percent, and 60,000 jobs were lost.
If the beer tax tripled, as some contemplate, beer sales volumes could drop as much as 6 percent, according to our sources in the industry.
The industry’s push-back against tax increases has been muted in public - as per the request of the Senate Finance Committee. But individual senators are still hearing from barley growers, hop farmers and brewers.
“If a Senator or Congressman came out and said, ‘You have nothing to worry about,’ then my job would be a hell of a lot easier,” Papazian said this week. “But I’m not believing anything unless it comes from the horse’s mouth.”
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Jeremiah McWilliams is a native Virginian who came to the Post-Dispatch in early 2007 to cover beer and other consumer products. He previously covered manufacturing for the Virginian-Pilot newspaper in Norfolk, Va. He is a graduate of Washington and Lee University. 
They should tax religious orgs. before they increase the tax on brew.
God, I hate the government. In 50 years I can’t imagine how high taxes are going to be. Bring on the term limits and lets clean house in Washington.
I hate anti-alcohol activists, and I hate sin taxes. Don’t tax the vices to pay for health-care - raise the health-care rates for the smokers, alcoholics, and anyone who is obese without a medical reason. That way the people who abuse cigarettes, alcohol and fast food can pay for their own health-care, and those who enjoy things in moderation won’t have to pay more at all. You have to submit to a urine and blood test and have your medical history examined extensively in order to get life insurance, and you will pay higher rates if you are a smoker, have a history of alcoholism, or are obese. Health insurance should be the same way. Don’t get me wrong, I believe everyone needs health insurance and I’m not advocating charging people more for medical conditions that are not related to poor lifestyle choices, as is the case with life insurance. But I don’t think there’s anything wrong with drinking in moderation or enjoying McDonalds from time to time, and I don’t think we should have to pay more for those things simply because some people make bad choices. I can’t say the same about smoking (even occasionally in social situations), but I’m opposed to cigarette taxes by default. If we allow excessive taxation of one “sin”, we will be opening the door to taxing them all.
As long as I’m on a political tirade, I have to add another thought. I’m not a big fan of unions because I believe they have destroyed industry in this country by inflating salaries for uneducated workers, which has created unreasonable expectations for the workers and ungodly labor costs for the employers. I won’t even go into the long lunch breaks, the work stoppages, and everything else I have seen from union employees in my lifetime… I’m also by no means a hardcore conservative, but I am not a fan of Obama. With that being said, I hope all of you union workers who voted him into office are happy with what is happening now. Between the government taking control of GM and Chrysler and forcing restructuring that is eliminating thousands of your jobs and the continued threat of increased taxes leading to massive job losses in other industries, I’d highly recommend taking whatever buyout you can get and going back to school. You’re going to need a college degree to compete in the world that these “intellectual” liberals are creating. That is, of course, unless you want to sit on your butts and let the government take care of you using my tax dollars. But then you would have to make massive changes, because there’s no way a welfare check would pay for the lifestyle your over-inflated union wages have accustomed you to.
That being said, I can’t wait to go home and crack open a cold beer. My fridge in the garage is stocked with fine products from Schlafly, O’Fallon, Boulevard AND A-B. Support your local brewers AND your massive, foreign-owned corporate behemoth that still employ thousands of hard-working Missourians.
They’re going to tax SOMETHING. Be it beer, or liquor, or gas…. they’re not going to stop until all of our money is taken away and handed out to everyone in even proportions. Welcome to the Communist States America.
The Busch’s…love’em or not they knew how to protect the American beer drinker and themselves in the process. They demanded that AB lobbists and wholesalers work the halls of Congress each session to avoid eqivilance taxes on alcohol. Beer’s tax rate is less than an equal amount of alcohol in wine or distilled spirits. They knew a Demo tax grab would kill the industry and punish the American middle class. With all the former American breweries owned by internationals now, Congress will not be so slow to sneak one of these through. AB spent millions in PAC monies and forced all senior management to partisipate. Ever notice AABIII was Republican and AABIV was Democrat…great strategy to cover both sides of the aisle. Doubt In-Ept Bev can sway reasonable thinking now in Congress. Buckle-up and get out your wallet. Bud Light Lime won’t be the only brand that sells for more.
Get use to it. They are going to tax everything so they can provide “european” healthcare. More money for a worse system. After spending some months in London I can tell you the healthcare system is horrible. Enjoy!
Gosh guys, so gloomy today! Lager Heads is not a license therapist, but we play one on the Internet. Our advice: crack open a brewski of your choice and don’t worry about the health care debate for a few hours. There will be plenty of time to pay those taxes in the future. Enjoy the beautiful Friday afternoon in STL.
Good advice, Jeremiah. I’m off to do just that! I think I’ll start with a refreshing BLL, then move on to a tasty Boulevard IPA (if my wife didn’t drink them all last weekend, that is).
Ahhhh!