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Fight The Fee

July 6, 2010 By Jay Brooks

cahj
If you read my rebuttal to San Francisco Chronicle columnist C.W. Nevius support of the proposed fee on alcohol in the city, then perhaps you recall that he interviewed the California Alliance of Hospitality Workers so he could appear to show both sides of the argument. It was not really in any way balanced, and in fact I think he used them as a straw man, though he did so in a way that I believe was incorrect at any rate.

Happily, the California Alliance of Hospitality Workers is fighting back, and is trying to get people to contact their local supervisor in San Francisco to have city residents ask their politicians to oppose the proposed fee. The e-mail to use is Board.of.Supervisors@sfgov.org. If you live in San Francisco and drink alcohol in moderation and responsibly, please contact your supervisor and ask him or her to oppose the ordinance.

cal-alliance-hjobs

You can also see their response to the proposed ordinance, Supervisors’ Short-Sighted Proposal to Tax Alcohol Will Hurt Hard-Working San Franciscans. They’ve also set up a Facebook page.

One additional important fact that they mention is that the required Nexus Study has still not been filed or made public. With the hearing to vote on the proposed ordinance a week away — July 14 — at the very least that’s stacking the deck and at the worst is complete bullshit.

Here’s just a few more reasons why this tax is unfair, particularly to craft beer:

  • This legislation taxes beer by alcohol strength, putting a huge and cumbersome burden on brewpubs, self-distributing small brewers and wholesalers because each and every beer is taxed at a different rate.
  • Craft brewers are not part of the problem. Craft beer is priced high and is a product of quality, not quantity. Craft beer drinkers do not abuse their beverages.
  • With the “margin chain” and price point consideration, the tax will be much higher than five cents a drink. At retail off-premise, the increase will be about 50-75 cents a six-pack and on premise about 75 cents to a dollar per pint.
  • Brewers are already heavily taxed. Small brewers already pay a state and a federal excise tax in addition to all other business and sales taxes. Combined, about 40-44% of the cost of a beer already goes to taxes.
  • Higher drink prices in a singular market such as San Francisco will lead consumers to not come into the City for dining and entertainment.
  • Higher taxes will lead to lost jobs, off-setting the new tax.
  • The proposed tax would hinder the ability of craft brewers in the City to grow, employ more people and positively contribute to City’s economic recovery.
  • Higher taxes will mean higher prices which means lower sales. If this tax in imposed, sales will decrease and craft brewers will not be able to sustain the ability to continue full employment or continue to invest in our business and community.

Filed Under: Beers, Editorial, News, Politics & Law Tagged With: California, San Francisco, Taxes

Confirmation Of How SF Alcohol Fees To Be Applied

June 29, 2010 By Jay Brooks

san-francisco
I got confirmation last night on how exactly the proposed San Francisco alcohol fees will be applied. The actual language in the ordinance is incredibly vague and open to interpretation (and misinterpretation). My source has either spoken to several city supervisors or talked to others who have, a combination of the two, I believe. And here’s what we’ve learned. There’s good news and bad news, so to speak.

Despite the change in language — apparently an “ethanol ounce” is common European parlance — the proposed ordinance will still be applying the tax “per fluid ounce of alcohol,” forcing a lot of math and administrative headaches, to say the least. So every single bottle containing alcohol, even changing vintages, will require a formula be applied to it. For example, take a 12 oz. bottle of beer that’s 6% a.b.v. Here’s how it will work.

  • 12 oz. x 0.06 (the % of alcohol) = 0.72 ounces of alcohol
  • 0.72 x $0.076 dollars = 0.5472 cents “fee”
  • Rounded, presumably, to 5 cents or possibly 5.5 cents

To say the least, it will be an administrative nightmare — primarily for wholesalers, brewpubs and self-distributing breweries who will be filing the reports and paying the fee.

Here’s a few more examples of what the fee would be for various alcoholic beverages.

  • 22 oz. bottle of 10% barley wine = 16.7 cents
  • 750 ml bottle of 14% wine = 27 cents
  • 750 ml bottle of 40% single malt whisky = 77 cents
  • 15.5 gallon keg of 8% Pliny the Elder = $12.06

And let’s not forget that the fee will be imposed at the wholesale level, meaning that it will be marked up and the fee passed along to consumers at a much higher rate, and then marked up again by the retailer or bar, whoever sells it to you and me.

Filed Under: Editorial, News, Politics & Law Tagged With: California, San Francisco, Taxes

Kenya’s Kill Me Quick Moonshine

May 15, 2010 By Jay Brooks

kenya
An alert Bulletin reader (thanks Jason) sent me a link to a story in the Economist with similarities to an earlier post I did, Poisoning People During Prohibition: A Disturbing Parable, in which the African nation of Kenya is battling the problem of illegal moonshine occasionally made with jet fuel or embalming fluid. Kill me quick, Kenya’s lethal brew deserves its name is an interesting read. A native moonshine concoction known as chang’aa is causing problems for both the government and a good portion of the nation’s youth. Chang’aa is a fermented drink brewed with corn (maize) and sorghum.

The problem is, unscrupulous moonshiners are speeding up the fermentation by adding stolen dangers like rocket fuel … well, jet fuel, antifreeze and embalming fluid. Those things, it goes without saying, are not something you should drink, even diluted. According to the article, “10ml of methanol can burn the optic nerve; 30ml can kill.” Also, police raids have turned up other unsavory things in the moonshine: decomposing rats, excrement and women’s underwear. As the Economist points out, the word chang’aa means literally “kill me quick” and is well chosen. For the equivalent of one U.S. dollar, you can buy four glasses, and the adulterated chang’aa has killed more than a few and blinded still others.

The reason people drink it is because most people in Kenya live in grinding poverty and can’t afford legitimate alcoholic drinks like beer. Beer there is so heavily taxed that only the rich can afford it. Surprisingly, no one but the breweries are suggesting that perhaps the taxes could be lower so poor people don’t have to risk death to drink alcohol. East African Breweries, “one of Kenya’s biggest companies and taxpayers,” unsurprisingly “wants to see illicit chang’aa replaced with a safer commercial version.” That would undoubtedly involve lowering alcohol taxes and despite the fact that it might actually save lives the government is concerned that “bringing the price of alcohol down to that of water risks increasing alcoholism and forcing the very poorest into even dodgier booze dens. In any case, it could add other costs: crime, violence to women and children, unsafe sex and bad health.” None of those are good, but are they worse then death? It’s the old alcohol as entirely evil argument writ large.

kenya-moonshine
Chang’aa

This is an interesting case to me because it’s taking the idea of how taxes affect consumption to a whole new level. Neo-Prohibitionists in the U.S. have long argued that higher taxes will decrease consumption and especially access by young people. It’s been their stated rationale for many attempts at pushing higher excise taxes on alcohol. But there’s obviously a threshold where that starts to backfire. In Prohibition, for example, removing it completely (in effect, the same as making it too expensive) didn’t stop people from drinking, it simply drove it underground. And in this real world example, Kenya’s taxes are obviously too high such that it’s driven people to drink illegal — but affordable — alcohol. Ours haven’t reached that point yet, despite the best efforts of the anti-alcohol wingnuts. As one commenter succinctly put it:

When a given chunk of economic activity contains a fair mix of illegal and legal business, controlling the illegal part by increasing the regulations of the legal part is illogical and ineffective. On the other hand, if the great majority of the market can eventually be brought into the legal realm, then there is room for regulations to reduce whatever damage it might cause. The legal recreational drugs in most of the world, alcohol and tobacco, are regulated and taxed to the point where if the prices were much higher, an illegal market would likely develop. For example, when cigarettes in Canada were taxed to a price of roughly 2X that in the US, some serious smuggling began. Thus, when Kenya should do is first enable unadulterated legal alcoholic drinks to be sold at a price that’s competitive with the rotgut the drunks are now stuck with. Even habitual drunks will pay a small premium for safety and known potency.

In fact, the UN estimated that half of Kenya’s alcohol trade is for the illegal moonshine, suggesting that the taxes for the legal drinks is way too high. But apparently it’s harder to give up the tax revenue than create a safer world for Kenya. Instead, crackdowns are the order of the day, as Kenya to Sustain War Against Brews. In typical jack boot fashion, ignoring any root causes, “Internal Security Minister Professor George Saitoti says the government will not relent on its war against the production and consumption of illicit brew in the country.” Yeah, that’s going to fix the problem. Unfortunately, it’s a typical response. It’s easier to beat people with a cudgel than understand their problems and try to fix the underlying causes. Obviously, people don’t actually want the risk of death associated with their choice of drink, but the fact that so many are willing to take such risks is indicative of a deep-seeded problem. It seems to me that the accepted propaganda that all alcohol is evil causes such bad decisions because governments seem more worried about not going against the propaganda than they are about finding actual solutions.

While not easy by any stretch of the imagination, the best solution to Kenya’s problems is to improve the life of its poorest citizens. That would do more to quell the moonshine than virtually anything else they might try, and it would certainly be better than using police powers and violence. The strong arm approach never works in the long run. But I suppose as long as the U.S. is the model, that’s what other nations will try, too. Our enforcement of Prohibition was pitifully ineffective and caused more deaths than people it saved, I’d warrant — including purposely poisoning people in the name of enforcement — and our current “war on drugs” is similarly having the same useless effect, making the problems associated with drug use actually worse and guaranteeing the criminal element, and the violence that brings with it, too. Until we realize that such methods will never work, other nations will continue to look to us for guidance will and fail as miserably as we have. More’s the pity.

Filed Under: Beers, Breweries, Politics & Law, Related Pleasures Tagged With: Africa, Kenya, Prohibitionists, Taxes

National Action Alert: Help Craft Brewers Reduce Taxes

March 15, 2010 By Jay Brooks

tax
If you’re a regular Bulletin reader, you’ve already seen me rant about how unfairly taxes are levied on the brewing industry, who has to pay more taxes than any other product sold in America, except tobacco. With the help and support of the Brewers Association, H.R. 4278 has been introduced into thee U.S. House of Representatives seeking a redress of those egregious taxes. The BA has issued a national action alert, asking beer lovers everywhere to contact their elected officials to ask them to co-sponsor the bill. Here’s the press release:

Federal legislation in the U.S. House of Representatives, H.R. 4278 (link opens a PDF), seeks to enact a reduction in beer excise tax for America’s small brewers.

For small brewers brewing less than 6 million barrels annually, this legislation would cut the small brewer tax rate in half, to $3.50/barrel on the first 60,000 barrels, and reduce the upper tax rate from $18/barrel to $16/barrel on beer production above 60,000 barrels up to 2 million barrels.

Of the 1,525 breweries in America, 962 are brewpubs and 470 are the smallest bottling breweries, which produce volumes of 15,000 barrels of beer a year or less and sell their beers in local markets. Once barrel equals about 13.8 cases of beer.

The original small brewer tax rate of $7/barrel was established in 1976 and has never been updated. Since then, the annual U.S. production of America’s largest brewery increased from about 45 million to 107 million barrels and over 200 million barrels globally (or 1,240,000,000 five-gallon batches of homebrew!). Much has changed and the challenges small brewers face as small American businesses have grown dramatically since 1976.

Why is this a good idea?

  1. A tax reduction will help grow small business breweries and provide greater access to the beers you enjoy.
  2. Harvard University’s John Friedman’s study, Economic Impact of Small Brewers Excise Tax Reduction (H.R. 4278), (link opens a PDF), reveals that H.R. 4278 would also help stimulate job creation quickly and at a low cost:
    • The bill would generate more than 2,700 new jobs over the first year to 18 months, followed by an average of 375 new jobs per year over the following four years.

Please contact your U.S. Representative and ask that he/she sign on as a co-sponsor of H.R. 4278.

We have developed a resource page to give you the information and tools you need to make the case to your Representative for supporting this tax relief measure—and by extension, for supporting the small brewery businesses that are such a vital part of our local communities.

On the resource page, you will find a link to a list of current sponsors of H.R. 4278. If your Representative DOES NOT appear on this list, please take a moment and email your Member of Congress to ask them to cosponsor H.R. 4278.

If your Representative is already a cosponsor, please email him/her a brief thank you for their support of small brewers and you, the craft beer drinker and enthusiast.

Here’s some links to help you find out who your elected officials are so you know who to contact:

  • Contacting the Congress
  • Project Vote Smart
  • U.S. House of Representatives official website
  • U.S. Senate official website
  • Who Is My Representative?

Okay, people get contacting. Your brewers thank you.

Filed Under: Breweries, Editorial, Politics & Law Tagged With: Government, Taxes, United States

Beer Excise Taxes By State

June 1, 2009 By Jay Brooks

tax
I found this nice map of the 50 states with the individual beer excise tax brewers in each state has to pay in addition to the federal excise taxes at Charlie Papazian’s blog, too. It’s originally from Don’t Tax Our Beer, a website maintained by the Tax Foundation.

The map provides an interesting snapshot of all the states. It’s worth noting that all the southern states have high excise taxes on beer, where the idea of drinking being sinful is, I think, more prevalent.

excise-taxes-2009

Filed Under: Beers, Politics & Law, Related Pleasures Tagged With: Taxes, United States

Abe Lincoln on Beer & Politics

October 28, 2008 By Jay Brooks

lincoln-logo
With a week to go before the U.S. Presidential election November 4, I thought I’d share one of my favorite quotes by our 16th President: Abraham Lincoln.

“I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts, and beer.”

          — Abraham Lincoln

Unless I hear otherwise from Bob Skilnik, I’m going to assume this is a quote that Honest Abe actually either uttered or wrote down on the back of an envelope. Though Lincoln is now generally reputed to have been a teetotaler, in his time some accounts do contradict that and say that on occasion he did drink in moderation. “Reliable testimony indicates that Lincoln was a light user of beverage alcohol.”

He was certainly pragmatic enough to understand beer’s importance to the economy, especially when during his first term he turned to the beer industry, among others, to help finance the Civil War. In Brewing Battles, by Amy Mittleman, she details how in July of 1861, the US Congress (or a least what was left of it in the north) levied the first income tax on the remaining states in order to raise money to fight the war with the southern states. By the end of the year, Congress realized it wasn’t enough and they needed a way to raise more funds for the war. In a special session in December 1861, Congress reviewed a request by the Secretary of the Treasury, Salmon P. Chase, to raise the percentage of income tax slightly and levy excise taxes on a number of goods, including beer, distilled spirits, cotton, tobacco, carriages (the automobiles of the day), yachts, pool tables and even playing cards, to name a few. The amendments passed, and Lincoln signed them into law July 1, 1862. They took effect September 1. Several weeks later, the first trade organization of brewers, the United States Brewers Association (USBA), was founded in New York. They held their first national convention in 1863 and elected Frederick Lauer as their first president. Lauer owned a brewery in Reading, Pennsylvania, my home town, and I remember the statue of him in City Park as a child. It was the first statue erected in Reading. But I digress.

lincoln-quote

Excise taxes are a “type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country).” The excise taxes were intended to be “temporary” but it was the beginning of temperance sentiments in the nation, and many people objected to alcohol on moral grounds. In the decade following the war, most were rescinded, but the taxes on alcohol and tobacco were the only two to remain in force, and in fact are still in effect today.

The only reason these excise taxes remained after the Civil War was primarily on moral grounds, coming from prohibitionist organizations. And I think that’s still relevant in 2008 because today’s neo-prohibitionists are also trying to use a moral sledgehammer to raise taxes on alcohol in an effort to put beer companies out of business and/or bring about another national prohibition. In state legislatures in many states, neo-prohibitionist groups are trying a variety of tactics to further their agenda. Usually it’s couched in propaganda that pretends they’re concerned for the children, or people’s health or some other hollow claim that hides their true aims.

I still find the argument strange that there should be higher taxes on products some people find morally objectionable. I find soda morally objectionable because it’s so unhealthy that it’s contributing to a nation of obese kids (and adults) — not to mention that beer in moderation is much healthier for you. But I wouldn’t argue pop should have an excise tax. The very concept of a so-called “sin” tax seems antithetical to the separation of church and state. Sin is a religious concept, and should play no role whatsoever in our government. Making people pay a higher price for goods that other people don’t like seems not only a little cruel, but also contrary to freedom of religion, because those are the morals people are using to deny people getting (or making prohibitively expensive) certain goods that not everyone agrees are sins. By using one set of morals as the basis for a particular law (in this case an excise tax) it ignores other sets of morals that differ from the prevailing one. That’s how a theocracy works, and we’re not one yet, despite recent efforts to make religion a central issue in government.

What would Abe Lincoln have thought about all this? Well, first I think he’d be horrified that for the most part the “truth” he felt the people needed to “meet any national crisis” is not much a part of our mainstream media nor of the political process in particular. There are very few “real facts” in play. What there is, is propaganda and the manipulation of quasi-factual information distorted to suit an agenda. All that’s left, really, is the beer.

lincoln-beer-stamp

This beer stamp for 16 2/3 cents, to pay the tax on a 1/6 barrel of beer, depicting Abraham Lincoln, is believed to be from 1871.

Filed Under: Beers, Editorial, Politics & Law Tagged With: Prohibitionists, Taxes

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