Among several other tax increases, Kenley proposes to double the Indiana tax rate on beer from 11.5¢ to 23¢ per gallon. In addition, the Marion County restaurant tax rate would jump from 2% to 2.25%, taking a little more out of your pocket every time you order a pint at your local pub.
Let's put these numbers in perspective: what do these increased taxes mean for a real beer purchase?
A gallon of beer is 128oz, or 10 and 2/3rds standard 12oz beers. An increase of 11.5¢ on that many beers is just 1.08¢ per beer. So, when you check out at your local beer store, a six pack will cost you about 6.5¢ more and a 24 can case of beer will set you back about $0.26 extra.
How about eating out at your favorite restaurant in downtown? If we assume an average pint of craft beer costs about $4.50 in Indy, a 0.25% increase in restaurant tax will set you back about 1.13¢. But remember that we'll also have to pay the above increased tax rate on beer, about 1.44¢ on 16oz of beer, for a total of 2.57¢ per pint.
One question will be, "who's going to absorb this tax increase?" Will restaurants take the small hit and pay for the tax increase without changing prices? Or will they pass on the pennies tax increase, and possibly move to even higher pint prices?
Here are a couple other thoughts I've had while considering these tax increases:
- It's worth noting that state alcohol taxes have not gone up since 1981 and they're not indexed to inflation. According to one online calculator, the inflation rate since 1981 is such that things cost about 2.33 times more today. Therefore, doubling the alcohol tax still doesn't even equal the relative tax that Hoosiers were paying in 1981.
- Since the beer tax is only related to the volume of beer being bought, those that choose to buy cheap beer are actually paying relatively more in taxes. Remembering that the new tax rate will be 23¢/gallon (2.16¢ per 12oz), consider someone that buys a 6 pack of Oberon for $10. They're going to pay 6 x 2.16¢ = 13¢ in total beer tax. 13¢ on $10 is 1.3% tax.
Say someone else purchases a 24 pack of Miller Lite for $15. They're going to pay 24 x 2.16¢ = 52¢ in total beer tax. 52¢ on $15 is 3.5% tax. The lower the beer price by volume, the higher the percentage tax rate.