Tax hike brewing?

With an $800 million deficit projected for the state of Michigan this year, the state might raise the beer tax, said John Bebow, executive director of the Center for Michigan, an Ann Arbor-based think tank.

In previous fiscal pinches, the state legislature has increased tobacco, income, liquor and business taxes. The beer tax has remained at 20 cents per gallon since 1962.

Had the 1962 tax been adjusted for inflation over the last 45 years, it would now be generating more than $270 million a year instead of the $44 million it brings in today, Bebow said. The taxes on a barrel of beer, the equivalent of 2 kegs, would be $39 and a can of beer would cost about 10 cents more.

Raising the beer tax could have other implications, though.

According to a 2003 study by the National Academy of Sciences, increasing the beer tax could reduce alcohol consumption and curb irresponsible behavior.

“While this is something to consider, I don’t know if that motivation is necessarily pragmatic,” Bebow said. “I don’t believe a 10-cent increase would deter that many students from purchasing a can of beer.”

Some local beer vendors are not convinced.

Joey Zeer, owner of In and Out Food Store, said his customers are sensitive to the price of beer.

“If the price of beer increases for any reason, customers around here aren’t going to want to purchase it because they’re on a budget,” he said. “I get a lot of students who come in and ask for the cheapest beer I sell. It all has the same effect.”

LSA senior Stuart Wagner, who said he buys most of the alcohol for his house, said a hike in the beer tax could change his shopping habits.

“If the price changes enough on the massive amount of beer that I buy, I’ll just buy more hard liquor instead,” he said.

Wagner said he thought increasing the tax on tobacco would reap more benefits.

“Cigarettes are more addictive than alcohol,” Wagner said. “People still buy them even though they are already taxed so much.”

Bebow said an increase in the beer tax would be fair because consumers aren’t forced to pay it.

“Students can control how much beer they drink,” he said. “Would you rather have the state increase the taxes on your house, the taxes on the things you buy or the tax on beer,” he asked.

Gov. Jennifer Granholm has not said whether a higher beer tax is part of her plan to balance the state budget. Granholm spokeswoman Liz Boyd said yesterday that Granholm would discuss her financial plans in her State of the State address next month.

Bebow said the state should also consider consolidating school districts and cutting spending on state prisons.

Sin Taxes
How much these vices net the state of Michigan’s treasury

13.85: percent of the cost of liquor

$2: per pack of cigarettes

$0.20: per gallon of beer