08 January 2013

The Neo-Prohibitionists Are At It Again

The Center for Science in the Public Interest (CSPI), is a national busybody lobbying group that always want Congress to raise taxes on things they don't like. They've lobbied against cigarettes, transfat, coconut oil, salt, Big Macs (even proposing a unit of fat measurement called the "Big Mac" as in ". . .that's as much fat as 10 Big Macs"), soda and alcohol. They've circled back around to alcohol lately, proposing raising taxes on alcohol and revamping the tax structure to tax alcohol by units of alcohol. According to the Congressional Budget Office, they say, this would raise almost $60 billion over ten years. This would decrease consumption, increase revenue, reduce the deficit and fund anti-alcohol programs. That's a magic tax!

Unfortunately, the CSPI is counting on you not being smart enough to realize they are full of it.

Let's look at the basic argument. Raise taxes to decrease consumption and raise taxes. When CSPI says this tax will raise $59.9 billion over ten years, they cannot be factoring in how much sales will fall. So their projection has to be based on current sales. They don't know what the decrease in consumption will be. So let's play. And remember, kiddies, Google is your friend.

In 2009, the US produced 196 million barrels of beer. Do the math and that's 64,811,000,000 12 oz cans of beer. The tax rate on 12 ounces of beer has been $.05 since the 1990s. Now, the CSPI wants a "modest" increase of 60%, or $.03. Let's see how many zeros my desk calculator has (remember, breweries pay those taxes at the time of production, it is not collected at the time of consumption):

2009 tax revenue: $3,240,533,500

A tax study of cigarettes conducted by the CDC in the 1990s found that a 10% increase in taxes caused a corresponding 10% decrease in consumption. I don't know that it will hold true with beer taxes, but for giggles, let's assume it will. So a 60% tax increased will cause a corresponding 60% decrease in consuption.  That means once the tax kicks in consumption will fall to 25,924,400,000 cans. Future tax revenue will be $2,073,952,000, a decrease of $1,166,581,500.

But CSPI doesn't want you to do the math. They don't want you to think. They want you to hear their argument, nod your head at say, "A 60% tax increase is modest," and support their position.

Don't swallow what they are feeding you.

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posted by Jeff Holt at 14:36

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