Hold my beer…and your taxes
It’s right before a long-weekend and one thing on the mind of many Canadians is enjoying the one thing Canadians are proud of: our beer. Sure, Canada also excels at making wines and spirits, but when it comes to beer, that is something we trump the United States in (okay, pun totally intended there).
Henderson Brewing Co.
Canadians should be proud of their beer (actual beer, not yellow water), including the diverse selection from its many entrepreneurs. Earlier this summer, I found out that a Ryerson University alum was the co-founder of a brewery that makes a lager my dad adores. Two other brews my dad and I love is Brock Street’s Irish Red Ale and 5 Paddle’s Skullpucker, both found right in my home riding of Whitby. Of course, I like my ales as bitter as a disappointed political junkie after an election, such as Big Rig’s Disturbia India Pale Ale. One of my favourite stouts is Bolshevik Bastard by Nicklebrook, rather ironic considering that the nature of this blog is. Also, shout out to Alberta, where I spent my birthday in and had first enjoyed what breweries such as Tool Shed and Wild Rose have to offer.
Unfortunately, this post is not to advertise on behalf of these breweries for free beer-oh, how I wish that was the case-but to give my thoughts on the excise tax hikes on alcohol, especially since these tax hikes are tied to the Consumer Pricing Index and will rise each year. The taxation of alcohol is nothing new, and has been around for a while. Taxes like the ones on alcohol and products such as cigarettes and gambling are known as “sin taxes,” and the idea behind them is to try to discourage unfavourable behavior while raising revenue. Understandably, brewers don’t exactly like these kinds of taxes, and neither so many consumers.
So, if the purpose of a sin tax is to change the behaviour of consumers in addition to raising revenue, so would beer be an effective sin tax in that regard? Let’s think our governments logic through: If a sin tax is to discourage our behaviour, then a tax on beer should discourage the consumption of alcohol, right? Alcohol abuse is a serious concern, but we need to think about if tax hikes will properly address this issue. According to Matthew Stewart, an associate director with the Conference Board of Canada, beer is considered an inelastic good, meaning that people will generally continue to drink the same amount despite small price increases. Looking into some research myself, it’s clear that a lot more research, and up-to-date research too, is needed to determine exactly how inelastic or elastic beer is. My concern, as a bit of a Canadian beer snob, is what impact this will have on Canadian brewers? Are we just raising taxes of our citizens with no added benefits? Seems a lose-lose.
Flight at Granite Brewery
While the cost of a case of 24 beers would only be increasing by about a nickel, the cost of beer is expected to increase in subsequent years because of an escalator clause for tax hikes on the federal end. Don’t forget about other taxes that get tacked onto your alcohol. While this doesn’t sound like much on a beer-by-beer basis, those taxes add up, such as for Oland Brewery, which is expected to pay an extra $375,000 because of tax hikes from March.
Sure, with beer being an inelastic good, a small increase in price may not stop Canadians from drinking beer. But what about drinking Canadian beer? With the Canadian beer industry supporting 163,000 full-time equivalent jobs and many Canadian entrepreneurs, isn’t this an industry worth looking out for? Isn’t it worth it to keep Canadian beers competitive? And don’t get me started on Canadian wines and spirits manufacturers also. But don’t just take my perspective on it. Check out what some big stakeholders in Canada’s beer, wine, spirits, and restaurants industries have to say about it!
So, in conclusion, enjoy a relaxing weekend this summer before the next tax hike, and maybe try to enjoy low/non-alcoholic beers to save money, such as the aptly named Nanny State.
Cheers!
Originally posted on Story of a Tory.