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« Merger Mania | Main | The Fight Begins - Continued »

The Fight Begins

Well, the gauntlet has been dropped.  The only question is what will we do now?  In the December 28, 2007 edition of the Rocky Mountain News, the following little factoid was presented:

Alcohol Taxes

Since the early 1990s, the federal tax on wine - $1.07 a gallon – hasn’t budged.  The taxes on beer and liquor haven’t changed either, which means that, in inflation-adjusted terms, alcohol taxes have been steadily falling.  Each of the three taxes is now effectively 33 percent lower than it was in 1992.  Since 1970, the federal beer tax has plummeted 63 percent.

No big deal, right?  Just a little factoid to fill some space between the advertisements.  Sure.  Only one thing… that’s not the way it works.  This is not an accident or coincidence… this is how the real world of politics works.  First a factoid or two is thrown out to the media (or a book is written), and generally someone picks it up and runs with it.  This gets it in play.  Then a willing commentator or editorial board writes about it, this really puts it in play.  It is repeated throughout the media… all while those special interest groups work in the background, calling on their friends, calling in favors, planting the seeds in politician’s minds.  It gains momentum and soon becomes a true political force.  But by this time, often the issue has already been politically determined… the question is not IF, but rather HOW MUCH.  By the time you wake up and see what’s happening, the game can already be over.

With this in mind, I added some new Google Alerts to track this progress and low and behold, while I was writing the above sentence the first alerts on “alcohol taxes” already arrived – this took all of about 10 minutes!  And I guess I’m already behind the curve.

The December 26th NewYork Times has a wonderful op-ed (oh wait, they have it as a business article… they have a nasty little habit of mixing editorials with news throughout the paper but that’s a rant for another day), entitled,  Let’s Raise a Glass to Fairness

http://www.nytimes.com/2007/12/26/business/26leonhardt.html?_r=1&ref=business&oref=slogin 

Now who could be against fairness?  Certainly no reasonable person!

Here are some excerpts:

“The main cause of this golden age of inexpensive wine is the obvious one: globalization. Once confined to a small part ofEurope, the making (and exporting) of great wine is now done across the globe.

But there is also another factor that gets less attention. Since the early 1990s, the federal tax on wine — $1.07 a gallon — hasn’t budged. The taxes on beer and liquor haven’t changed either, which means that, in inflation-adjusted terms, alcohol taxes have been steadily falling.

Each of the three taxes is now effectively 33 percent lower than it was in 1992. Since 1970, the federal beer tax has plummeted 63 percent. Many states taxes have also been falling.

At first blush, this sounds like good news: who likes to pay taxes, right? But taxes serve a purpose beyond merely raising general government revenue. Taxes on a given activity are also supposed to pay the costs that activity imposes on society. And for all that is wonderful about wine, beer and liquor, they clearly bring some heavy costs.

Right now, the patchwork of alcohol taxes isn’t coming close to covering those costs — the costs of drunken-driving checkpoints, of hospital bills for alcohol-related accidents and child abuse, and of the economic loss caused by death and injury. Last year, some 17,000 Americans, or almost 50 a day, died in alcohol-related car accidents. An additional 65,000 people a year die from other accidents, assaults or illnesses in which alcohol plays a major role.”

… he has come up with a blunt way of describing the problem. “Do you think we should be subsidizing alcohol?” he asks. “Because that’s what we’re doing.”

“What’s especially unfortunate is that several states are now considering raising their general sales tax… These tax increases would raise the price of a huge array of items… you name it — that leave no social costs in their wake. Relative to alcohol, they are already overtaxed.”

The argument for higher tobacco taxes is simple enough. They help pay Medicare and Medicaid bills for tobacco-related illnesses and also lead to a decline in smoking. On average, a 10 percent increase in the price of cigarettes causes about a 5 percent drop in smoking, studies show. Not even addiction, it turns out, can overcome the laws of supply and demand. If anything, the argument for higher alcohol taxes is even stronger.”

“…a reasonable tax would still allow people to make their own choices about drinking. They would simply be asked to pay the true cost of the product they’re buying.”

At a minimum Mr. Cook suggests raising beer and wine taxes (which are now about 7 to 10 cents a drink) to the level of liquor taxes (more than 20 cents a drink) and then indexing them all to inflation.”

“In any event, people who have studied the issue and don’t have a financial stake in it tend to agree with Mr. Cook. “Taxes are way too low on alcohol,” Jonathan Gruber, an economist at the Massachusetts Institute of Technology, says. “It’s a public-policy failure.”

“That sounds like grist for a 2008 resolution: I hope everyone has a happy New Year and gets a chance to drink something good Monday night… And sometime soon, I hope none of them come with such an artificial discount.”

Where to begin?!  First let’s note that much of this language is exactly the same as that from MADD and the Center for Science in the Public Interest.  The beginning text is exactly what was reprinted in my local paper.  This isn’t just some isolated story; it is part of a larger strategy.  And if you don’t understand and accept that, the game is already over… it’s just that no one has told you yet.

What great strategy on their part.  Alcohol is SUBSIDIZED, and raising taxes on it isn’t really raising taxes, it’s leveling the playing field, it is getting rid of “an artificial discount”!  And trying to get the tax rate indexed to inflation… genius!  A guaranteed increase each and every year.  Of course all taxes that aren’t indexed to inflation in effect “go down” each year, but who cares?! 

Relative to other items, these other items are already over-taxed!  Who can be for that?  See, we aren’t really raising taxes, we are making those other bastards who have been subsidized… that’s us… pay their fair share.  And who can be against that?

Oh, and on the same Google Alert, there are 4 blogs already talking about this (want to guess which side they are on?) and 3 other newspapers with similar stories.  I’m certain if I wanted to search I’d find many, many more already out there.

Oh but not to worry, our newfound “partners”, MADD and their ilk, will certainly be supporting us as we make our case against these massive tax increases.  Oh sure.  And no one will be going back and using our own words against us.  No one would think to ask how we can fight increased taxes when even we (at least some of the duller ones) argue that lower prices are BAD.  Let’s see now, lower prices are bad but we don’t want you to raise our taxes… I guess that means we just want to pocket the money.  Yeah, that’s an easy sell.  Can you say self-serving bull?

And if it forces the closing of bars or restaurants, who cares?... we have already fought hard to prove that additional points of distribution are bad, therefore fewer are better!  We said it.

I would ask the question if we are collectively that dumb… but sadly that answer is already standing right in front of us.  But the gauntlet is down and the fight is well under way… you had better get acting NOW on your strategy and execution because by the time this rises to a significant story; the only question will be how much.

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