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Wednesday, 14 September 2016 17:50

Rep. Hooker’s proposed tax hike falls flat with craft brewers

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Rep. Hooker’s proposed tax hike falls flat with craft brewers COURTESY PHOTO

LANSING — A new bill proposed in the Michigan Legislature could more than triple the state’s excise tax on beer.

House Bill 5873, introduced today by State Rep. Tom Hooker, R-Byron Center, would raise taxes on beer from $6.30 to $21.70 per barrel, a 244-percent increase. The new tax would be the equivalent of 6.5 cents per 12-ounce can.

The bill, which had no cosponsors, immediately drew harsh criticism from Michigan’s craft brewers and from business groups, who see it as an attack on the state’s $1.8 billion craft beer industry.

Hooker issued the bill as a so called “user fee” — akin to taxes and fees put on the tobacco industry — to raise funds for organizations that treat alcohol-related issues ranging from fetal alcohol syndrome to rehabilitation clinics.

“At one time, Grand Rapids was considered the city of churches and now it’s considered Beer City — I’m not sure that’s a positive thing. With that, you have the health issues,” Hooker told MiBiz. “It’s nothing more than a user fee that comes a result of alcohol abuse and use.”

Hooker argues that he, as a non-drinker, should not have to pay for mitigating health issues that result from beer overconsumption.

But critics argue raising the state excise tax on beer will only impact Michigan-based craft brewers producing beer in the state, not the larger, multinational brewers.

While the 6.5-cent per can tax may seem modest, the legislation could increase the price of a six pack by as much as $2 once those costs are rolled up through the distribution and retail channels, according to craft brewers contacted for this report.

“I think he is understating the negative impact that consumers and the industry would incur,” said Scott Newman-Bale, a partner at Bellaire-based Short’s Brewing Co. who also co-chairs the government affairs committee for the Michigan Brewers Guild, where he serves as treasurer. “The increase would be grossed up by the state-mandated distribution channel, so by the time the consumer buys the beer, the impact will be huge.”

Other craft brewers agreed.

“Why would you attack an industry that’s been nothing but supportive?” said Dave Ringler, owner of Cedar Springs Brewing Co., referring to Michigan craft brewers’ economic impact and efforts to curb overconsumption. “Why would you punish them instead of the companies that target the frat boy, beer bong drinking culture?”

Ringler argues the craft beer industry promotes the quality of the experience rather than the quantity of consumption, and has made strides to reduce overuse.

Opponents of the legislation also point to the steady decline in deaths related to alcohol-impaired driving as evidence that craft beer is changing consumers’ perspectives on alcohol consumption.

Ringler said he was suspicious of raising the state excise tax to support public health initiatives regarding alcohol abuse now, especially considering the state has increased sales taxes on beer over the years.

“Suddenly, he’s looking at this as a cash cow to fund his pet project,” Ringler said. “There’s plenty of government ways for funding to be reallocated if these programs are valuable.”

Hooker remains adamant that the tax hike, which would add approximately $64 million to state coffers, will not be particularly onerous on the craft beer industry.

For its part, the Michigan Brewers Guild has been quick to condemn the legislation, co-signing a letter in opposition to the proposal and urging lawmakers to avoid co-sponsoring the bill, according to Director Scott Graham.

“Obviously, we think it’s a terrible idea,” Graham said. “Small brewers are growing and they need all the capital and cash flow they can to add space, equipment and employees. Increasing the tax by 250 percent on beer would not be a helpful thing. If you look at neighboring states, our tax is higher than any of them.”

The Michigan Beer and Wine Wholesalers Association also issued a statement opposing Hooker’s proposal.

“A tax increase of this magnitude would put Michigan businesses at a tremendous disadvantage with neighboring states and hurt a growing industry,” President Spencer Nevins said in a statement. “Increasing the beer tax will hurt each and every retailer, distributor, brewery and brewpub in Michigan.”

The Michigan Chamber of Commerce joined others in rallying against the bill, noting that if passed, the legislation would “take a wrecking ball to an industry that is currently thriving.”

Read 15484 times Last modified on Thursday, 15 September 2016 11:52
John Wiegand

Staff writer

[email protected]

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