News item
Liquor stores across the country will see their first big spike of the year in the week of July 4th. Independence Day leads to increased liquor sales in the states. Michigan is no exception, but with every hard liquor purchase, Michigans pay significantly more to the state.
A recent Tax Foundation publication, How Stiff Are Distilled Spirits Taxes in Your State? Compares state excise tax rates for the 50 states and the District of Columbia. With a distilled liquor excise rate of $ 11.95 per gallon, Michigan has the 10th highest rate in the country.
All alcoholic beverages are subject to sin tax – taxes aimed at reducing socially undesirable products and activities. It follows that spirits, which traditionally have a higher alcohol content than other alcoholic beverages, receive significantly higher excise tax rates. However, when compared nationally, Michigan’s tax on spirits is disproportionately higher than its other excise taxes.
Michigan taxes $ 0.20 per gallon on beer, $ 0.51 per gallon on wine, and $ 0.51 per gallon on champagne. In a national comparison, Michigan has the 29th highest rate for beer, the 35th highest for wine, and the 37th highest for champagne. That means Michigan has lower excise taxes on alcohol than over half the country, except for distilled spirits, where it’s highest in the top 10.
Of these top 10 states, Michigan is one of the eight control states. Control states impose monopolies on the sale of alcoholic beverages, which tends to drive up prices. The Michigan Liquor Control Commission uses its published goal of “Promoting Public Health, Safety, and Welfare” to justify regulations.
Michael LaFaive, Senior Director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, has published two analyzes, one in 2011 and one in 2020, that challenge the widely accepted notion that stronger regulation can reduce the negative societal effects of Alcohol decreases consumption. His studies found that regardless of whether a state imposes strong control, moderate control, light control, or just required a license, there is little correlation between regulation and public safety. It even notes that Montana, the only state with strong control, had the third highest alcohol-related deaths.
While the investigation found that alcohol regulations did not affect public safety, they did have an impact on prices. It was found that spirits prices in the control states were 3% higher. In addition, a 10% increase in the length of an alcohol control code was associated with a 10.4% increase in price.
The impact of Michigan excessive taxes on liquor is far greater for the average Michigan citizen than it is for more expensive liquor. It harms the state’s distilleries, especially small producers who are committed to local sourcing.
“Michigan’s high spirits excise taxes make it difficult for small distillers to compete with national brands that can afford to produce less per bottle in Michigan while producing more in other states – they have the ability to offset those costs, and so do we don’t, ”said Scott Ellis, owner of Michigrain Distillery. “Because of these higher taxes, the price per bottle for a small distillery is usually higher, making it difficult for bar owners to support their local distilleries because they either have to eat that extra cost or their customers do.”
Michigan’s hard liquor regulations encourage higher prices and disrupt business competition while doing little to nothing for public health and safety. It is time for Michigan’s lawmakers to question whether or not the state should continue its monopoly on alcohol regulation.