WI Senators propose raising excise tax 58%!!!

Several Wisconsin state senators are proposing an increase of 58% in the excise tax on spirits. It seems they realize they can't get the increase in tax on beer that they wanted just a few weeks ago and like any good predator have chosen to prey on what they perceive as a weaker target- spirits producers and wholesalers.

So, what is excise tax? All alcohol producers pay federal excise tax upon shipment of their product. In most states the state excise tax is paid by the wholesaler, because we produce our product in Wisconsin we pay the federal and the state excise tax. In our case, excise tax is the single largest expense in our product. We pay nearly $3 per 750ml bottle between Federal and State excise taxes before it gets to your local bar or store. After producers and wholesalers pay their excise tax, sales tax is charged to consumers. Excise tax is priced into the product and passed on to the consumer, therefore an increase in excise tax will cost the consumer more.

Senator Jim Sullivan was quoted in the Milwaukee Journal article as saying ". . . but I don't know that 50 cents a liter stops you from having gin and tonics in the backyard in the summer." Evidently he's not considering the effects on the hospitality industry overall. It may be one drink for him, but for people who's livelihood is selling drinks it's significant. Tens of thousands of people in this state make their living in bars and restaurants. Margins in these businesses are tight, and in the current recession many are already hurting without the added cost the proposed tax increase will create. A 58% tax increase on spirits will only hurt them more.

As for us, we are a small business that has only been selling our product for a little over three years. We have 3 full time employees and I have yet to pay myself. Last year we paid the equivalent of 2/3rds of our payroll in excise tax. By the looks of it the state will get an increase this year but I'll still be unpaid. Since we began selling in 2006, there are two more small distilleries in the state, and a recent change in law we fought for this summer would allow the states wineries to expand into distilling. A 58% increase in excise tax may dampen the expansion of these businesses.

There is also a large disparity in who pays how much of these excise taxes. Unfortunately politicians don't seem to know (or care?) that spirits producers/wholesalers already pay a disproportionate amount of alcohol excise tax. It is implied that because spirits contain a higher amount of alcohol that they should be taxed higher, but the costs to a producer are not proportional. Alcohol is alcohol. According to the government a 12 ounce glass of beer has equivalent amount of alcohol to a 5oz glass of wine or a cocktail containing 1.5 ounces of 80 proof liquor, yet the state excise on that cocktail is four times the state excise on the glass of beer. The senates proposed excise increase will make it about six times the excise cost of equivalent beer.

It's obvious state politicians favor (or fear) the beer industry, given the statement from Senate majority leader Deckers office; according to wispolitics.com, Carrie Lynch, spokeswoman for Senate Majority Leader Russ Decker, said he supports the tax increase and that it will be easier to pass than a tax increase on beer. "We just don't think we can get the votes for that, and we could sit here all session and try to get the votes for that or we could get something done," Lynch said. -In other words, lets stick it to the spirits guys because we can't stick it to the beer guys. In an interview on Milwaukee's Fox6 State Senator Lena Taylor said "We had to find a revenue, so what did we do? We did it on booze. Booze is what causes you to drive drunk." As if it somehow finds a way into your system all on it's own and turns the key for you. Evidently Senator Taylor also believes beer and wine do not contribute to drinking and driving?

I'm not advocating increasing the tax on beer and wine, I have many friends employed in the beer and wine industry, they struggle to make a dollar just like the rest of us. I'm merely demonstrating that spirits already pay a disproportionate amount of excise tax, lets not make a bad situation worse.

More info on how this effects the hospitality industry here-

https://www.axetaxesnotjobs.com/index.aspx

Economic Analysis of WI 58% increase from DISCUS (pdf)