Policy Documents

Research & Commentary: Wyoming Beer Taxes

October 9, 2013

At 2 cents per gallon, Wyoming’s beer tax is well below both the national average of 28 cents per gallon and considerably less than all its neighboring states’. The policy makes Wyoming’s beer prices very competitive with those of neighboring states. Wyoming legislators recently have begun considering proposals to increase the beer tax radically, to about 18 cents per gallon, and use the revenue to improve substance abuse programs.

The current tax is not a significant source of revenue for the state, contributing only $265,000 to Wyoming’s general fund in 2012 according to the Associated Press. The state’s real source of revenue for alcoholic products comes from a 17.6 percent mark-up on wine and spirits it charges retailers at its state-run warehouse in Cheyenne, from which all retailers must buy their alcohol. (Wyoming is one of 17 states that administer alcohol as a wholesaler.) According to the Casper Star-Tribune the combined total of taxes and mark-up fees brought the state $14.5 million in revenue in 2012.

Critics of the tax hike proposal argue the current tax, although low, already hurts local small businesses and microbreweries and the increased tax would put these businesses at a competitive disadvantage. Some legislators have asked how much it costs the state to collect the beer tax and taxpayers to prepare the payments. Estimates from the Wyoming State Liquor Association have found the usual cost businesses pay is low but the cost of compiling and filing the necessary reports each month adds expensive accounting costs.

Sin taxes, like those being proposed in Wyoming, are bad policy for many reasons. First, the taxes have a strong detrimental effect on Wyoming businesses. Businesses stand to lose sales as consumers seeking to avoid the tax vote with their feet and shop outside the state. Alcohol taxes also unduly burden moderate- and low-income individuals. Although many consumers think they can dodge these taxes by avoiding the product taxed, these taxes are commonly shifted to other products when the revenue runs short of expectations. So when the substance abuse programs become dependent on beer tax revenue that does not materialize, other taxes are raised to keep the programs funded.

Wyoming should not adopt tax policies that would destroy any competitive tax advantages it has, whether on incomes, sales, or specific products. Instead, it should defend those advantages and aim to lower the tax burden on taxpayers.

The following documents provide additional information about the beer tax hike proposal and other sin taxes.


Wyoming Legislative Committee Can't Reach Conclusion on Beer Tax Hike
http://trib.com/news/state-and-regional/govt-and-politics/wyoming-legislative-committee-can-t-reach-conclusion-on-beer-tax/article_e60a2772-f9ed-5e78-b1d6-26856c6e27a7.html
Kyle Roerink of the Star-Tribune discusses the debate in the Wyoming Legislature and across the state about the proposed beer tax hike. “The anti-tax nature of Wyoming voters--combined with the threat of placing a strain on some of the state’s small businesses and beer drinkers--has few lawmakers ready to hike the tax. Supporters of the increase in the Legislature and communities throughout the state, though, say few options are available to help provide more funding to combat alcoholism and its costly effects on Wyoming,” he writes.

Committee Rejects Bill to Raise Beer Tax
http://www.wyomingnews.com/articles/2013/09/17/news/19local_09-17-13.txt
Trevor Brown of the Wyoming Tribune Eagle discusses the Joint Revenue Interim Committee’s vote to reject a draft bill that would have hiked the beer tax to about 18 cents per gallon.

Mixed Results Achieved by ‘Sin’ Taxes in Nevada
http://news.heartland.org/newspaper-article/2004/03/01/mixed-results-achieved-sin-taxes-nevada
Writing in Budget & Tax News, John Skorburg reports on the counterproductive effect of an alcohol tax in Nevada: “A liquor tax hike implemented in Nevada in summer 2003 has done nothing to reduce alcohol use, but cigarette sales have slowed after an 80-cents-per-pack increase, the Reno Gazette-Journal reported on December 22.”

Back Door to Prohibition: The New War on Social Drinking
http://heartland.org/sites/all/modules/custom/heartland_migration/files/pdfs/13969.pdf
Writing for the Cato Institute, Radley Balko observes the well-organized efforts of activists, law enforcement, and policymakers portend an approaching “back-door prohibition”--an effort to curb what some of them call the “environment of alcoholism”--instead of holding individual drinkers responsible for their actions. Policymakers should avoid the temptation to restrict adults’ choice of whether to use alcohol, Balko argues.

Taxing the Poor
http://www.heartland.org/policybot/results/21582/
The National Center for Policy Analysis Task Force on Taxing the Poor exposes how government unduly burdens its low-income citizens. It concludes, “Policymakers who consider raising excise taxes at the federal, state or local level--regardless of the good they think they are doing--should consider the disproportionate burden their lower-income constituents will bear.”

Ten Principles of State Fiscal Policy
http://heartland.org/policy-documents/ten-principles-state-fiscal-policy
The Heartland Institute provides policymakers and civic and business leaders a highly condensed, easy-to-read guide to state fiscal policy principles. The principles range from “Above all else: Keep taxes low” to “Protect state employees from politics.”

Research & Commentary: The Best and Worst Ways to Eliminate a Budget Deficit
http://heartland.org/policy-documents/research-commentary-best-and-worst-ways-eliminate-budget-deficit
John Nothdurft of The Heartland Institute identifies some of the most and least effective and economically advisable ways states use to trim their budget deficits.

Sin Taxes: Size, Growth, and Creation of the Sindustry
http://heartland.org/policy-documents/sin-taxes-size-growth-and-creation-sindustry
Adam Hoffer of the Mercatus Center at George Mason University explores three criticisms of sin taxes. First, the taxation of selected goods as a source of general budget revenue contradicts the standard Pigouvian social welfare argument. Second, the economic burden of sin taxes falls disproportionately on low-income households. Third, the expanding number of goods being taxed in this way results in unproductive preventive and defensive lobbying by the affected industries.

Taxing Sin
http://heartland.org/policy-documents/taxing-sin
Richard Williams and Katelyn Christ examine several myths about sin taxes in this Mercatus Center paper. “Recently, however, the arguments for imposing new excise taxes and increasing existing ones have reemerged across party lines and have spawned several myths about the efficacy of sin taxation,” they write.

The Economics of Sin Taxes
http://www.acton.org/pub/religion-liberty/volume-4-number-2/economics-sin-taxes
Writing for the Acton Institute, James Sadowsky explains how sin taxes affect use of the products they are imposed on, and he describes the recent public backlash against such taxes.

Higher Beer Taxes Unfair, Regressive
http://news.heartland.org/newspaper-article/2003/11/01/higher-beer-taxes-unfair-regressive
Chris Kinnan, director of public affairs for Citizens for a Sound Economy, argues in this Heartlander digital magazine article that beer taxes are unfair and regressive, hitting poorer consumers hardest. Kinnan points out 44 percent of the cost of the average beer consists of taxes.

Beer Tax Facts: The Economic and Societal Impacts of State and Federal Taxes on Beer
http://heartland.org/policy-documents/beer-tax-facts-economic-and-societal-impacts-state-and-federal-taxes-beer
The Beer Institute looks at some of the real-world impacts of beer taxes and explains what happens when the tax rates are increased or reduced.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartlander’s Budget and Tax News Web site at http://news.heartland.org/fisca, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.