An alert Bulletin reader (thanks Sean O.) sent me a link to an article in the Bohemian alternative weekly, Liquor’s the Kicker: How a Tax Aimed at Alcopops is Harming Craft Brewers by Alistair Bland.
It’s the same story I told briefly in an earlier post, but in much greater detail. It’s about how the Marin Institute, and other anti-alcohol groups, went after Alcopops to get them re-classified as “distilled spirits” even though there’s no actual spirits in them and they’re the same strength as the average beer. The idea of getting them taxed at a higher rate was, according to Michele Simon, research and policy director of the Marin Institute, so manufacturers would be forced to “raise their retail prices and make them less appealing—or accessible, anyway—to children.” Of course, making them more expensive for adults is of no importance and neither was the fact that her claim that they’re “pretending to be beer” was hogwash. Nobody ever called them beer. Most retail chains, including when I worked at BevMo, created a new class of drinks to categorize them. We called them “Malt-Based Beverages” because that’s exactly what they were. Beverages that started like beer, brewed with malt, and then a flavor essence was added toward the end of the process to give them their specific individual flavor. The end product was the same a.b.v. as most beer, and so they were taxed accordingly. The difference is a lot. Beer is 20 cents per gallon while spirits are $3.30.
But the law failed utterly to do what was its stated purpose. “[B]rewers explain[ed] during public hearings that the new language would drag them under purview of the distilled spirit tax, [and] reps of the giant alcopop companies warned the board that they would alter their drink formulas and thereby dodge the tax if approved, according to California Small Brewers Association executive director Tom McCormick, who both gave and listened to testimony at a public meeting in Sacramento prior to the law’s passage.”
And that’s exactly what the Alcopop manufacturers did. “Records available on the Board of Equalization’s website show that 27 flavors of Mike’s Hard Lemonade, 16 flavors of Smirnoff flavored beverages and seven flavors of Bacardi alcopops are now made without distilled spirits.”
What did happen, was craft brewers who make barrel-aged beers now account for nearly all of the taxes collected due to this new law. “According to the Board of Equalization, $93,378.10 has come from taxation as distilled spirits of drinks that previously were taxed as beer, and brewers of bourbon- and brandy-barrel-aged beers have paid almost all of it.”
According to Tom McCormick, who runs the California Small Brewers Association, and who witnessed the new law from start to finish:
The entire process of enacting the distilled spirit tax—from its beginnings as a sincere petition from the Marin Institute to its current state of malfunction—has made a mockery of state policy making.
“It didn’t do anything to fix the [alcopop] problem,” he says. “It only ensnared craft brewers, and it has wasted taxpayer dollars in the process.”
The Marin Institute’s reaction? “‘In hindsight, someone obviously should have figured out better language to isolate these alcopops and leave beer out of it,’ [the Marin Institute’s] Simon says.”
The thing is hindsight was never needed. This was not a case of the consequences of this legislation being unknown or unintended. They were known to all relevant parties. There was ample opportunity to improve on the language of the bill at numerous stages of the process from the bill’s introduction to its being signed into law. But nothing ever was changed. Everybody knew what would happen and that’s exactly what’s come to pass. There were no surprises. That’s what happens when unintended consequences are really intended ones.