Ann Arbor area businesses say beer tax would make it hard for them to compete

Gov. Jennifer Granholm proposed doubling the state’s 1.9-cent-a-bottle beer tax and increasing the cigarette tax by 25 cents, pushing it to $2.25 a pack.

Last year, the beer tax raised $42 million and the cigarette tax accounted for more than $1 billion.

“Beer distributors are doing all they can to employ hard-working people with good jobs and good pay while creating a responsible environment for businesses to compete and people to be excited to stay in Michigan,” Morgeson, marketing manager for O&W Inc. in Ypsilanti, wrote in a letter of response to the news about the increase. “An increase in the beer tax will make Michigan businesses uncompetitive and unable to help the local communities that have made our state such an interesting and wonderful place to live.”

Granholm’s office would not release information about possible budget solutions, according to a Grand Rapids Press article.

“There have been many reports on possible solutions to the budget deficit, but we are not reacting to reports,” Megan Brown, Granholm’s deputy press secretary, told the newspaper. “Discussions on how to resolve the deficit continue.”

Michigan has a higher beer tax than Ohio, Indiana, Illinois and Wisconsin, according to the Federation of Tax Administrators. According to Morgeson, 44 percent of the cost of a glass of beer is taxes, including all state and federal taxes.

When suppliers are forced to increase prices, the trickle effect on distributors and retailers results in more cost to the customers, Morgeson said in an interview.

“It’s a disadvantage for us to compete with Ohio and Indiana,” she said. “People can just go to those states to buy beer for less, and all that money the state is losing in tax revenue.”

Duncan Williams, head brewer at the Grizzly Peak Brewing Company, said the business pays $6.30 per barrel of beer to the state and $7 per barrel in federal taxes. It also pays taxes on all of its ingredients.

“Lots of other industries have to pay taxes, I know that,” he said. “But a guy who makes shoes doesn’t get taxed on every shoe. We pay more than our fair share.”

Grizzly Peak of Ann Arbor employs about 70 people, including the three who run the brewery.

“Any money that we can save or don’t have to spend on taxes, we can use to employ another person,” he said.

Morgeson said O&W has seen several of its accounts close due to the lack of jobs in the area. Most places that closed were along the border where customers can easily go across state lines to purchase alcohol.

“When you raise prices, you make it more expensive to go out, have dinner,” she said. “Those kinds of things keep our communities vibrant.”

Matt Greff, owner of the Arbor Brewing Company in Ann Arbor, said the increase would be devastating.

“I am generally not a knee-jerk person, but doubling the beer tax in the state of Michigan would definitely cripple our two breweries,” said Greff, who also owns Corner Brewery in Ypsilanti.

The company pays $25,000 a year to the state, he said. Greff said he would support an increase on the beer tax for large breweries. About 96 percent of the beer produced in the United States is produced by 3 percent of the breweries, he said.

An increase on the tax for the large businesses would not only give the state 96 percent of the taxes they want, but also would foster growth in the small, local businesses that are trying to make it in Michigan, Greff said.

Jessica Kerman is an intern for AnnArbor.com. Reach our news desk at 734-623-2521 or news@annarbor.com.