New Hampshire: Plan to hike beer tax riles up brewers

By Elizabeth Dinan January 13, 2013
Seacoast Online
About 43 million gallons of beer were sold in New Hampshire during the last fiscal year, and it was taxed at a rate of 30 cents a gallon, raising a total of $12.8 million in beer taxes.

Boost that beer tax by a dime per gallon and the state would raise another $4.2 million, which could be used for alcohol prevention and treatment programs, suggests state Rep. Charles "Chuck" Weed, D-Keene. With fellow Democrat Richard Eaton of Greenville, Weed is co-sponsoring a bill that proposes a 10-cent-a-gallon increase to the beer tax, with a stipulation that the millions in extra revenue be used by the Department of Health and Human Services for alcohol treatment programs.

"Last year we passed a bill to allow nanobreweries to sell at farmers' markets. New Hampshire is on the verge of becoming kind of a special environment for beer culture."

The beer tax is imposed on licensed wholesalers, manufacturers, brew pubs and nanobreweries, then passed on to consumers.

"I would like to see the extra revenue go toward a badly stretched budget," said Weed, who prefers light thirst-quenching beer over heavy craft brews and says he's made his own beer.

Weed said his bill doesn't propose a tax increase on wine or hard liquor, both of which are regulated and sold by the state of New Hampshire, because, "I have an unconscious sense that we should start with small steps."

The bill was filed last week and already faces plenty of opposition.

Smuttynose Brewery owner Peter Egelston called the proposed beer tax increase "a combination of bad social policy and very bad economic policy." For starters, he said, the proposal is, "a chicken (expletive) way to raise taxes."

"I would tell whoever in the Legislature is in support of this the same thing," he said. "Because when the person who goes into the store and sees the price of beer is up by say, $1 a six pack, it's never going to occur to them that it's a tax increase. They'll curse out the brewers and the procurers and the retailers, but we have nothing to do with it."

Egelston added that, "beer is a price-sensitive product" and because of that, any tax increase "would certainly impact our sales."

"There is no doubt in my mind it would go down," he said.

Further, the brewery owner predicted, any beer tax increase set by the state would be passed onto beer drinkers two-fold. Egelston explained that's because a six-pack sold by a producer for $10 is marked up by the distributor by 30 percent, then marked up another 30 percent by the retailer. Neither are going to reduce their profit margins to absorb a new tax, he said.

"The cost of that tax will double by the time it gets to the consumer," he said. "It hits the consumer twice as hard as a sales tax. Say what you will about a sales tax, but at least you can see it and know what it is. And there are federal and state excise taxes already buried in beer costs."

The federal tax on beer is currently $7 a barrel (there are 31 gallons in a barrel) and there is current legislation to increase the federal tax, as well as opposing legislation proposed to lower the federal tax for small brewers.

"The right federal policies will help small brewers compete and thrive and hire more workers," said Brewers Association CEO Bob Pease in a public statement. "The wrong policies would wreak havoc on this dynamic industry."

Rep. Weed said the original intent of New Hampshire's beer tax was to use the money for removing trash from along state roads because there's no bottle or can deposit, but the state has been "raiding it for the general budget."

The New Hampshire Liquor Commission's enforcement chief, Eddie Edwards, said all money raised by the state through the sale of wine and liquor, as well as taxes on beer, "goes right to the general fund."

Weed reminds that the state's 30-cent tax on every gallon of beer hasn't been raised since 1983. And according to Alcohol Justice, a nonprofit organization that advocates using some alcohol profits for alcohol programs, if New Hampshire's beer tax kept pace with the rate of inflation, the tax would now be 69 cents a gallon.

According to Weed's pending bill, the extra beer revenue raised through the dime-per-gallon increase could pay the salaries of three full-time "prevention and treatment program specialists." Total pay for those hires would range from $134,258 to $152,742, benefits would cost between $75,069 and $92,639 and there would be a travel budget, according to proposed changes to the beer tax law.

The balance would be used for treatment and prevention services, and about 20,000 people would receive treatment, according to the proposed legislation.

State Rep. Adam Schroadter, R-Newmarket, who co-owns The Stone Church restaurant in Newmarket, said if the intention of the bill is to help people who have problems with alcohol, then the state should pay the tab.

"Given that the state operates the wine and liquor portions of those sales, it seems like that's where that should come from, instead of from a local growth industry," he said. "I don't think that's the right place for that tax."

Egelston said taxing "a specific group of consumers to support a particular social objective, no matter how worthy that objective may be," is a "slippery slope."

"People who advocate for higher taxation (on alcoholic beverages), if they're honest, will say they're doing it not to raise revenue but to reduce demand," he said. "These people are on a moral crusade. It needs to be said up front that there are people in our society with terrible alcohol abuse problems. But beer is a legal product that the vast majority of people consume responsibly."

Egelston added there are "lots of things that people abuse," citing prescription drugs and automobiles as examples. Yet no one is proposing higher taxes on prescription drugs to curb abuse, or on cars for safe-driving programs, he said.

"They want to hurt the beer industry," he said.

And don't compare beer taxes to cigarette taxes, said Egelston. "People who advocate taxing beer often make an analogy to the cigarette tax," he said. "I will state there's no legitimate comparison, because there's no safe consumption of cigarettes. On the other hand, you can't say that about the person who has a bottle of beer when they get home from work."

Schroadter said he was "taken aback" when he heard "out of the blue" about the proposed beer tax increase last week because he's been one of a group of legislators who've worked on "beer and wine issues."

"It looks like the funds go to a worthy cause," he said. "I just wonder at what expense?"

With Rep. Mark Warden, R-Goffstown, Schroadter said he just formed a "House Beer Coalition" to provide legislators with information about small brewers and wine makers and to advocate on their behalf.

"Last year we passed a bill to allow nanobreweries to sell at farmers markets," he said. "New Hampshire is on the verge of becoming kind of a special environment for beer culture."

Now, Schroadter said, he's hearing from brewers that the proposed beer tax bump would translate to a 10-cent increase for every 40 cents worth of beer sold, or a 25 percent mark-up on beer.

"It makes it very difficult to do business here," Schroadter said. "We're just starting to have people come to New Hampshire to sample beer. We have a real opportunity to become that go-to state."

Weed said he expects opposition from lobbyists representing grocers, particularly in border towns, where out-of-state beer buyers represent a good portion of the customer base. But even with a 10-cent tax increase on every gallon of beer, Weed said, "since we don't charge a deposit, it's still cheaper."