Politico Predicts 'Dire' Results From Tiny Alcohol Tax Cuts, But Little Boost From $1.5 Trillion Tax Bill

At Politico, consistency has never been a strong point. Somehow, the just-signed tax law supposedly won't have that much of an effect on Americans' economic behavior, but there's no doubt that the bill's tiny cuts in taxes on alcoholic beverages will bring about disastrous results.

Concerning the new tax law on the whole, Politico's Bernie Becker wrote the following on December 17 (bolds are mine throughout this post):

The next question is whether this bill will jolt the economy the way its supporters predict. Trump and other top Republicans have said that the economic growth created by the tax cuts will more than offset its current $1.456 trillion price tag.

Ben White was even more skeptical back in October:

Reality check on tax cut growth claims

Much of the GOP case for their tax cut effort is that it will unleash a decade of faster growth that will more than offset the cost of the bill and lead to millions of jobs and fatter paychecks. But what if that growth never materializes?

But on New Year's Eve, the site's Brian Faler relayed virtually certain predictions of "dire consequences" due to the bill's reduction in alcohol taxes:

Tax cut on booze triggers fears of more abuse and drunken driving
Public-health advocates say the effects of the Republican tax law will be dire.

People hoisting a beer mug or tipping a champagne glass to ring in the New Year have an extra reason to celebrate: Congress just slashed taxes on alcohol for the first time in decades.

But public-health advocates fear the effects of the Republican tax law will be dire — more drunken driving, underage drinking and other alcohol-related programs.

They say Congress’s decision to cut alcohol taxes by 16 percent also contrasts with lawmakers’ treatment of cigarettes, a health threat they consider on par with alcohol, which has seen its levies climb nearly 1,500 percent since 1970.

“The cheaper alcohol is, the more people drink and the more they have alcohol problems, and there is a huge international literature that has shown that over and over and over,” said David Jernigan, head of the Center on Alcohol Marketing and Youth at Johns Hopkins University. “The public health ramifications of this continue to be invisible to policymakers.”

... Public health advocates say there is substantial academic research showing links between tax rates and alcohol consumption and argue, if anything, the levies ought to be increased.

I didn't think so.

Now let's read the next sentence from Faler carefully:

That translates to $1.6 billion in savings next year for MillerCoors; Diageo, the maker of such brands as Captain Morgan rum and Ketel One Vodka; and smaller beer and spirits operators that had pushed for the cut.

Faler should simply have written that the savings is for the entire alcoholic beverage industry. Instead, readers will think that only the entities listed plus the "smaller beer and spirits operators" will share the savings. Readers who work harder than they should have to can determine that the savings are industrywide. That's because Faler reported that "Last year, taxes on wine, beer and liquor raised $10.6 billion," and $1.6 billion divided by $10.6 billion is the reported 16 percent.

Continuing:

Beer makers now generally pay $18 per barrel, which translates to about 30 cents per six pack, though small producers pay $7 on their first 60,000 barrels. Beginning Jan. 1, brewers will pay $3.50 on the first 60,000 barrels, and $16 after that, up to 6 million barrels.

Pass the smelling salts.

A six-pack of beer might come down in price by a few pennies. Ignoring the small-production exemption, a $2 reduction in the $18 tax would translate to about 2.7 cents (30 cents times $2 divided by $18) per six pack. Given that six-pack prices start at about $5, and assuming that competition would cause the savings to be passed on to consumers, prices would come down by 0.54 percent or less.

There is also a 50-cent tax reduction on wine — per gallon.

The industry says that the tax reductions will give them the ability to invest more in their businesses and to hire more people. If they're right, that would help the economy expand, and prices wouldn't even fall by the minuscule amounts just discussed.

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So the message from Politico's aggregate reporting appears to be that a cut in beer prices of a just a couple of tenths of a percent will lead to big increases in alcoholism and drunk-driving crashes, but an overall tax cut of about 1.5 percent of all income, amounting to hundreds or thousands of dollars per year for most Americans (and a much larger percentage cut in Americans' tax bills) probably won't accomplish much.

I won't drink to that, because there's very little chance that either claim is true.

Cross-posted at BizzyBlog.com.


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Congress Economy Business Coverage Taxes Politico Ben White Brian Faler Bernie Becker