23 February 2009

Beer and taxes

(Something that slipped through my fingers when I was putting together yesterday's round up.)

Porch Dog has good thoughts on Oregon raising it's beer tax 1800%. My quick reactions are:
(1) This is a shame because Oregon has such a great brewing culture. There is really fantastic availability of craft beers there, and the legislature is essentially telling people "no, no, don't drink our local stuff, drink cheaper out-of-state brew instead." Crazy. Absolutely crazy.

(2) The new tax rate is pulled out of thin air. There's no logical way to go from $3/barrel to $49 in one swoop, especially when $49 is 50% higher than the next highest rate in the nation.

(3) This is pretty blatant confiscatory taxation. There's no justification for that particular rate other than "you have $49 per barrel that we want, and we think we can get it from you." The Oregon legislature doesn't think beer is imposing $49/barrel of negative externality, nor does it need the sum of this money for beer or alcohol realted programs. It just thinks it's found a ready source of dollars to pitch into their money hole.
Point #2 is something I've been meaning to complain about for a long time, because it's one of those minor but irritating things about legislators: they pull numbers out of their butts. In computer programming we call numbers present without justification "magic numbers." In science generally you have to either pick from a small set of "typical" numbers (need a parameter between 0 and 1? Default choice is 1/2.) or you have to make an explicit disclaimer to the effect of "this value was arrived at without a full investigation of the parameter space, but preliminary experiments yielded promising results." Similarly it seems like businessmen have to explicitly say "this is our discount rate, this is our depreciation rate, etc. which gives us this expected present value, blah blah blah." (I'm obviously more familiar with the parlance of us eggheads than those business folk in their fancy suits.)

Bureaucrats seem to have at least a patina of rigor, but legislators and executives just pluck numbers from the ether. It's much more about what they can convince their colleagues and constituents sounds good than about what makes sense. I shouldn't expect any different, but dammit, I'm a numbers guy and once you start playing fast and lose with numbers I get cranky.

I know the CBO and the CRS (and probably others) are being more rigorous, but I can't help but feel that gets completely ignored between their reports and actual legislation. Is there some way to turn over these kind of numerical matters to groups like the CBO to inject a little bit of logic into the process? That would probably open up a whole other can of worms...

This is probably the reason I can't get too excited about Pigovian taxes. They're great in theory and if we lived in even a slightly more technocratic society like Singapore I'd be all for them. Unfortunately I know in America they're going to devolve much more into what congresscritters think sounds good than rather than an accurate way to price externalities. Too bad.

Update: Via Jacob Grier, I see that Idaho is also looking to raise its beer and wines tax by 346% to $0.52/gal and $1.52/gal respectively. Why 346% ?!

1 comment:

  1. My guess here is that some congressman are playing, probably subconsciously, with the idea of price imprinting. the 1800% figure was launched specifically because it is stupid high. their actual aim is to negotiate down to a far more reasonable fee closer to the national mean, which would still be a huge increase but will seem better given the initial proposal. but still...thumbs down all-round for Oregon.