Back in March, I mentioned a statistic I ran across in Maxim magazine, that 46,948,952 people in the world are drunk at any given time. That was the specific number given in the factoid, which I figured was approximately 0.68% of the population of the world. The current Playboy magazine for June 2009 has the same statistic listed on it’s “Raw Data” page, but expressed as “An estimated 0.7% of the world’s population is drunk at any given time.” There’s still no citation for the source of the factoid, but using the current world population, which as I write this is 6,910,026,951, that works out to 48,370,189 drunk souls. That makes it fairly consistent with the previous figure, so the two probably share the same source, if only they’d be so kind as to actually include it. I’d really like to know how they arrived at that figure, the criteria used, etc. You can find this statistic all over trivia sites, but no one cites its origin. Still, it’s an interesting tidbit.

If you read my previous post about the Senate Finance Committee round table on Tuesday, where three of the thirteen people called on to testify about how to pay for Obama’s $1.5 trillion universal health case initiative suggested that the excise tax on beer should be increased by between 50% and 400%, then you won’t be at all surprised that the Beer Institute’s Legislative Action Network has issued an Action Alert for people in favor of keeping good beer affordable. They’re asking that people, if so motivated, please “call your member of Congress and your Senators, especially if they are on the Senate Finance Committee and weigh-in on the devastating impact ANY increase on the federal excise tax on beer would have on your business. The following two links can help you determine your member of Congress and Senators. And below is a table of the members of the Senate Finance Committee with a link to each member. Public comments can also be made at the committee’s website.

Below is additional analysis of the impact of raising the excise tax on beer from the Beer Institute.
 

Raising Alcohol Taxes Will Have a Severe Economic Impact,
Offsetting Any Revenue Generated by the Tax

Directly and indirectly, the beer industry employs approximately 1.9 million Americans, paying them almost $62 billion in wages and benefits and generating more than $198 billion in economic output. Proposals to triple or quadruple the excise tax will have severe economic impacts on the industry. Just tripling the current beer tax to $20.25/proof gallon will cost the country jobs at a time when the national unemployment rate is the highest it has been since 1983. Beer Institute estimates that a 300% increase in the excise tax on beer will result in 179,000 lost jobs, $5.9 billion in lost wages, $18.9 billion in lost economic output, and $2.7 billion in lost federal, state, and local revenues from decreased production and consumption. The impacts of these tax increases may be even greater for small businesses as microbreweries and brewpubs will be hit with significantly larger tax bills. Many of these smaller companies may be forced to close.

An excise tax is designed to collect additional monies as volumes increase over time. The growth in beer industry volumes have added more than $800 million in additional federal revenue since 1991 when the beer excise tax was doubled. Excise taxes are hidden taxes on consumers who pay them in the final retail price of a product. In 2008, taxes on the beer industry at all levels of government added up to more than $41 billion dollars. The total tax burden of federal, state, and local taxes on beer are more than 41 percent of the retail price paid by consumers.

Beer Taxes Disproportionately Affect
Lower Income Consumers

Approximately 50 percent of all beer purchased in the United States is by consumers with household incomes of $50,000 per year or less. That means the relative impact of beer excise taxes on households in the lowest income brackets is 6.5 times greater than those with the highest incomes.

The vast majority of our consumers are hardworking Americans who do not abuse alcohol products (Source: Harris Interactive, 2008). By levying an even higher tax on this segment of the population, Congress will make it even more difficult for them to enjoy a simple pleasure during these difficult economic times. These are exactly the people who should not be penalized in a misguided attempt to deter the small percentage of the public that abuses these products. Furthermore, during the fall 2008 campaigns, many candidates called for providing tax relief to this portion of the population. Brewers and beer importers agree, which is why they have supported measures such as the Brewers Excise and Economic Relief (B.E.E.R.) Act of 2009, which already has 174 cosponsors in the U.S. House of Representatives. The BEER Act (H.R. 836) hopes to return the federal beer excise tax back to its pre-1991 level of $9 per barrel for large brewers and $3.50 for small brewers.

As reported by Harry Schumacher in his Beer Business Daily (subscription required), at a Senate Finance Committee round table on Tuesday, three of the thirteen people called on to testify about how to pay for Obama’s $1.5 trillion universal health case initiative suggested that the excise tax on beer should be increased by between 50% and 400%. They also suggested — finally — that excise taxes be applied to soda pop (although I think perhaps it should be anything with high fructose corn syrup) among much else, such as trans fat and sodium levels in packaged and restaurant foods (though why not remove all the sugar in packaged foods, too?). Even though I disagree with the concept of excise taxes, at least people are finally suggesting taxing products which in my opinion are more harmful to society as a whole than alcohol.

Here’s what Mike Jacobson, the director of the horribly misnamed Center for Science in the Public Interest (CSPI) told the Senate Committee:

Because alcohol beverages are a “major cause of illness, addiction, death, injury, and psychosocial problems, Congress should raise alcohol excise taxes, tax all products equally on the basis of their alcohol content, and index tax rates for inflation. Boosting the tax on distilled spirits by 50 percent and equalizing the beer and wine rates would generate $12 billion in new revenues annually. Simply adjusting tax rates for the inflation that has eroded revenues since the last increase (in 1991) would raise $5 billion in new revenues per year. Higher taxes and prices would dampen alcohol consumption and lead to additional health-care and other cost savings to the federal government and to the economy generally.”

Jacobson’s arguments are typical of modern prohibitionists, full of scary statistics that prove to be wrong or inflated at best, propaganda, and selective reasoning (when they’re reasoning at all). When he says that “[h]igher taxes and prices would dampen alcohol consumption” does he not get that it would reduce the tax benefits, as well? Putting an entire industry out of business removes personal income tax, business tax and wipes out the excise taxes completely. And that helps raise more revenue how? And then of course there’s the numbers. Even if we accept his $12 billion in new revenues figure, that means his idea of burdening an entire industry would raise 0.008% of the $1.5 trillion total needed to fund the President’s health care initiative. It’s kind of ironic that’s it’s point-0-0-8 percent. Now how rational a suggestion is that? Let’s kill an industry that’s actually keeping people employed to raise a tiny fraction of the money needed.

But one of his arguments is especially laced with error and a false conclusion. Here’s the argument:

Some parties (usually industry) express concern about the regressivity of alcohol taxes, but the actual problem is much exaggerated. In fact, compared to upper-income consumers, lower income families buy much less alcoholic beverages. People in the lowest quintile of incomes consume only 8 percent of alcoholic beverages; those in the top quintile consume 38 percent. Overall, only 1 percent of Americans’ total expenditures are for alcohol, regardless of income. Most people would be little affected by higher alcohol taxes. More than one-third of adults do not drink at all, and half of all drinkers drink sparingly. For instance, using the highest-increase scenario discussed above, half of all beer drinkers would pay less than $10 per year—under three cents a day—in new taxes. Because alcohol consumption is heavily concentrated among the top 20 percent of drinkers who consume 85 percent of all the alcohol, most of the tax increases would be paid by those who drink excessively. Using some of the revenues for alcoholism treatment, prevention, and public education would further reduce the toll of alcohol problems and would probably disproportionately benefit low-income problem drinkers.

Is it at all surprising that the top 20% (which is a “quintile”) income households (who have lots more money) buy a disproportionally larger amount of alcohol? I suspect they also buy a higher percentage of food, soda, and every other conceivable consumer product or service too. The bottom 20%, with far fewer resources can’t afford to buy as much. So WTF? That somehow makes it fair because people with more money can afford to buy more and thus can pay higher prices? And that also somehow means it’s not regressive after all? What a nutter. The lower income bracket would also be more burdened since they’re already heavily burdened by virtue of their limited buying power. They could only afford less, but that’s not regressive?

And why is it okay if “most of the tax increases would be paid by those who drink excessively?” Why punish people who choose to drink more? It’s people like Jacobson that actually make me want to drink more. But what that tacitly means is that he’s characterizing the tax in moral terms as a sin tax. He’s suggesting, not very subtly, that people who drink more deserve to be punished. And see here I thought the point of the discussion was to fund health care for all Americans, not target certain ones that the CSPI disagrees with and punish them.

And then there’s the tired argument that the higher taxes could fund “alcoholism treatment, prevention, and public education” which further reduces the amount available for the initiative. Just suggesting that funds be diverted for such specific programs makes clear in my mind that he doesn’t really understand why the Senate asked for his testimony.

But according to Harry it gets worse. Here’s what Robert Greenstein of the supposedly liberal Center on Budget and Policy Priorities thinks should be done:

After pointing out that alcohol taxes are lower today than when they were last raised in 1991 due to inflation, he recommends one of three options, each worse than the one before:

1. The first option would be to raise tax rates back to where Congress set them in 1990 — i.e., to put them at the 1991 level, but adjusted for inflation since that time. Under this option, taxes would increase by nearly a buck a case, to $2.16 a case in federal taxes alone.
2. Behind door number two is an option that is apparently put forward by the Congressional Budget Office, which is to set alcohol taxes at a uniform $16 per proof gallon, which means equalizing beer, wine, and spirits taxes. The current tax on spirits is $13.50 proof per gallon. This CBO option would raise that to $16 per proof gallon and also apply it to beer and wine. This would nearly triple the federal excise tax on beer, raising it by $2.16 a case, for a total federal tax of $3.36 per case, while simultaneously increasing spirits taxes by a lesser multiple.
3. The final option Dr. Greenstein proposes, which almost makes me sick to even write about, would be to combine the first two options in a sort of alcohol Armageddon. Under such an approach, alcohol would be taxed across the board at the level that distilled spirits were taxed in 1991, when Congress last acted, with that level adjusted for inflation since 1991 and going forward. Under this option, the tax on a case of beer would quadruple to about $4.32 a case.

First let’s address the inflation argument. If that’s true, then isn’t practically every thing in the world cheaper now due to inflation, isn’t every unadjusted tax in the same situation? And if so, then why aren’t we talking about adjusting all taxes for inflation? Why are we only talking about alcohol?

He acknowledges that “moderate alcohol consumption can be neutral or even beneficial for health,” but seems to believe that it’s still acceptable to punish all alcohol consumers because of the supposed high costs imposed by “excess alcohol consumption.” Even if true, why is this an acceptable line of reasoning, that everyone should be punished for the excesses of a small minority? How did we get to a point in our social evolution where that seems like a good idea?

He goes on to cite the similarly spurious arguments that “the National Academy of Sciences has recommended raising alcohol excise tax rates to discourage underage drinking” and “a 2007 report issued by the Surgeon General noted that increasing the costs of alcohol use (i.e., raising the tax on alcohol) could influence teenagers to drink less.” How does anyone read that and not see the flawed logic? Not only is that not what he was asked to testify about, but we should raise taxes (and prices) on all alcohol because it “could” make people who are already forbidden from drinking it consume less? That just makes no earthly sense whatsoever.

Then there’s the idea of making taxes on alcohol uniform — a kind of “flat tax” — by proof per gallon. Forget all the math, this simply ignores the costs of making the very different alcoholic beverages, their pricing and how they’re consumed. Spirits, of course, cost much more than beer and wine is likewise often much more expensive then beer, too. While both could conceivably withstand a tax increase because of the higher price they command in the marketplace, beer would be absolutely decimated by such a taxing structure.

He concludes with more nonsense about moderate drinkers not being unduly burdened since they drink less already. That therefore the increased taxes would mean the price of their alcohol would only rise a little bit, ignoring, of course, the reality that if the taxes on a glass of wine increased 10 cents that the price would not go up merely 10 cents, too, but by far more. This is the same argument that Jacobson made, just in a slightly different form, and its just as ridiculous an argument here, too.

The third person to bring up alcohol was Jonathan Gruber, a Professor of Economics at M.I.T.

Sin Taxes: The second is increased taxation of “sin good” whose use raises the cost of health care for all Americans. This would include cigarettes, alcohol, and high sugar or fat foods that cause obesity. There is a strong public policy argument for raising taxes on all of these goods. In particular, the tax rate on alcohol is well below the level that would account for the damage that drinking does to society, in particular through drunk driving. Yet it is difficult to raise sufficient revenues from these sources, and these revenues will not rise at the rate of health care spending; indeed, they are likely to fall over time if we move the population towards healthier lifestyles.

Gruber at least concedes that raising these taxes would not only raise very little money but that the amount would decrease over time, as well. So you have to wonder why he brought it up at all. What I find perhaps most troubling is that he refers to taxing these particular items as “sin taxes.” That just seems like such antiquated thinking. I don’t think an economics professor gets to decide what is and isn’t a sin. He may consider alcohol to be a sin, but millions of other Americans believe it’s perfectly acceptable to drink an alcoholic beverage. And both positions are equally valid because deciding what’s a sin is a personal decision based on one’s religion or moral compass, which still was — last time I checked — a freedom we all enjoy as citizens of the United States thanks to the Bill of Rights. So I think Gruber is more than a little presumptuous when he tries to decide what’s a sin for all Americans.

Here’s Harry’s take on the whole proceedings:

It’s clear that these and other groups’ alcohol tax agenda — which they’ve been peddling for years — is only gaining an audience now with the powers in Washington because the federal treasury is in desperate need of funds. It’s clear to me that they are presenting more public policy arguments than fund raising. After, even the most draconian measure above only raises about $30 billion over five years, and that’s if consumption doesn’t fall off a cliff (which we know it does when looking back at the 1990 doubling of taxes). That’s a fraction of the trillions needed to fund this program. Plus it’s a highly regressive tax, and the resulting job losses will reduce income tax revenue, something I’m quite sure is not figured into their numbers. Jonathan Gruber, PhD, professor of economics at MIT pointed out the paradox of it to the good senators in attendance: “It is difficult to raise sufficient revenues from these sources, and these revenues will not rise at the rate of health care spending; indeed, they are likely to fall over time if we move the population towards healthier lifestyles.” In other words, higher taxes reduces consumption, which in turn reduces taxes. Not a great business model, even for the government.

We must keep this all in perspective. This was only a round table (not even a formal hearing) of a bunch of propellerheads with letters behind their names, policy wonks who’ve never run a small business or had to scrounge to make payroll (I mean that with the utmost respect, of course). We knew what they were going to say before the said it. Having said that, it’s clear this isn’t going away because of the desperate money grab going on in Washington right now. Now we must band together and fight this the smart way. If you haven’t had your senator or congressman to your brewery or distributorship lately, this summer break is the perfect time.

Harry’s right, of course, about keeping this in perspective. I guess I should be pleased that only three of the thirteen targeted alcohol. But I’m also quite worried that we’re seeing only the tip of the iceberg in a more concerted effort by neo-prohibitionist groups like the CSPI, and others, to use our present economic crisis to their advantage to further an unrelated agenda. The number one priority of most, if not all, politicians is to stay in office. Using alcohol as a bogeyman can be an attractive alternative from having to face the real causes and consequences of our current economic situation. As a result, I feel quite confident in saying this is not the last time we’ll find alcohol squarely in the crosshairs. At this point as the economy continues its downward slide, the politicians and the New Drys whispering in their ear about demon alcohol will continue to find common ground to the potential detriment of the millions of Americans who enjoy a drink now and again, not to mention the millions more whose livelihood depends on alcohol to feed their own families and pay their taxes. It shouldn’t be an us vs. them world, but it sure seems increasingly that way.

Portions from Beer Business Daily reprinted with permission. If you don’t already subscribe, and beer is your business, you should consider subscribing to Harry’s daily (and sometimes more frequent) e-mail newsletter.

The California Small Brewers Association will be holding their bi-annual General Meeting Tuesday, May 19th at the Karl Strauss Brewery in San Diego, at the production facility at 5985 Santa Fe St., which is near the airport. The meeting is open to any and all craft brewers in California, whether you’re a member or not. Though if you’re not a member, I would urge you to consider joining. Sure, yeah, I know — money’s tight — but can you really afford not to be a member of an organization who’s looking out for your interests? Anyway, climbing down off my soap box. Come down and see what the CSBA is all about. Here’s a summary of what will be going on at the meeting:

The CSBA has lined up a great speaker lined with a very relevant topic: Marketing craft beer to women will be the topic presented by Ginger Johnson. This is NOT just about “selling” to women. Ginger talks in depth about how subtle enhancements to your tasting room, brewery tours, brewpub restaurants, brand graphics and your brand “message” can better embrace the woman consumer. This information is immediately useable and valuable for breweries and brewpubs of all sizes. As we grow our businesses, we compete with major beer brands, wine, spirits – and each other. But 50% of the drinking population is still almost untouched when it comes to beer: women. Please RSVP by this Friday if you plan to attend. Email tom.mccormick@probrewer.com to RSVP, and you must RSVP to attend.

 
Meeting Schedule:

 

• 12:00-1:00 – Lunch ($10 members/$20 non-members)
• 1:00-1:30 – Association Update with Tom McCormick, executive director CSBA
• 1:30-2:15 – Legislative and Tax Threat Update by Chris Walker, lobbyist, CSBA
• 2:15-2:30 – Break
• 2:30-2:45 – “I am a Craft Brewer” Video Update by Greg Koch. Greg will give a brief update on the craft beer video “seen round the world.” Greg will let us know how many “views” the video has had and the future of this craft beer marketing piece.
• 2:45-4:15 – Women Enjoying Beer by Ginger Johnson. Ginger will talk about authentically and accurately marketing craft beer to women. Not just “selling” to women, but how subtle enhancements to your tasting room, brewery tours, brewpub restaurants, brand graphics and your brand “message” can better embrace the woman consumer. This information is immediately usable and valuable for breweries and brewpubs of all sizes.
• 4:30-6:00 – Beer Social (tours of the new bottling line and brewery expansion). Stick around and mingle with our sponsors and fellow brewers. Tour the new bottling line and brewery expansion.

One of my favorite things about the internet is that one is constantly making new, unexpected discoveries whenever one fires up Google. You just never know what you’ll find, and since my mind works in tangents, references, and connections I can easily fritter away entire afternoons wandering about. Anyway, I stumbled across these charts at the graphic designer’s website who created them for SloshSpot last year. His name is Jess Bachman and they’re wonderful presentations of statistical information on beer consumption. SloshSpot used them last October for a post they called The Year in Beer: Beer Drinking in America by Volume. Bachman did a total of eight charts, three of which are shown below. The original captions are show in blockquotes. Here’s how Bachman describes the project:

Essentially it’s one point of data, the amount of beer consumed in the US annually, only it is envisioned in several different ways. Very large numbers are difficult to conceptualize and very large volumes, areas, and other measurements are even further out of the minds grasp. So this is an attempt to take this data point and play with it until the reader comes away with a better sense of the American appetite for this frothy brew.

You can see the rest either at Jess Bachman’s website or the original SloshSpot post. There are a couple of small errors (like malt is incorrectly listed as a “grain”) but it’s a pretty cool series of graphic design with great visuals to give an interesting perspective on the data.

Only China is has a greater thirst, but they also have an extra billion people’s thirst to quench so with only one fourth of the population, we certainly hold our own.

With moon-landing levels of public support, cooperation and diligence, we could get this lasting testament to the wonders of Beer created, and filled too. OK, still day dreaming here, but if you just wanted to visualize 30 teragrams of liquid, here you go. What’s a teragram? It’s a scientific way of saying “that’s fucking heavy!”

Speaking of the moon, where would a visualization attempt be without some reference to the distance to the moon? If its too big for “around the earth x times”‘ then its “to the moon and back x times”. Well this one was quite short of making it to our nearest neighbor, Mars, but this stack of cans tops out at a respectable 4.8 million miles of space. And just for you terrestrial types, that’s around the earth 185 times. But really, what a waste of beer.