Why not? The excise tax on alcohol makes up a much smaller portion of the overall price of great beers like those made by Three Boys, Emersons, Renaissance, or Epic than it does for the dreck my students drink. Suppose that these student beers sell for $1 per bottle while good beer sells for $5 per bottle. A doubling of the excise tax from about $0.40 to about $0.80 would, in the limiting case of full pass-through (assuming an inelastic demand curve), increase the price of cheap beer from $1 to $1.40, a 40% increase, while good beers would increase from $5 to $5.40, an 8% increase. If anything, good beer becomes relatively cheaper with an increase in the excise tax. It's absolutely more expensive, but the price ratio between the two beers decreases: instead of being 5X more expensive, it's then a bit less than 4X as expensive.
In general, regulations that increase fixed costs regardless of output help big producers and hurt small guys. In general, regulations that increase per-unit costs regardless of output level do more to hurt big producers. That's why small businesses tend lobby for regulations that reduce fixed costs (like Sunday closing laws) while big businesses tend to lobby for regulations that increase fixed costs (like coal scrubbers on power plants).
Over on the Beer Blog, a member of the Society of Beer Advocates (though not speaking for them) argues
In this country you have the big two. We know who they are. Even morons waving around hand-wringing think-of-the-children legislation like yourself know who they are. These big two don't care about alcohol. They don't care about excise tax. They make product, not beer. They have a captive and uneducated market (I mean that literally - they don't know any better, not that they are stupid) who will continue to drink their product no matter what. This is great for them. It's great for you, Geoff. It's murder for the small brewers in this country, and it's murder for what you, in your stupid and misguided way, claim to be trying to achieve.For an excise tax increase to have this effect, it has to be the case that demand elasticity (the percentage change in quantity demanded given a percentage change in price) at the low end is very very small relative to demand elasticity at the high end of the market. There has to be a smaller response to a 40% price increase at the bottom end of the scale than there is to an 8% increase at the top end. I don't buy it.
Another argument I've heard is that the big guys can absorb the price increase more easily than the niche producers by further denigrating their product quality. But if the big guys can make more money by making the bottles or the beer even thinner, why haven't they done it already? Are they just being generous by not taking on that profit opportunity prior to the tax increase? They may well make some marginal changes to re-optimize on the quality/price front after the imposition of the fixed charge, but it would be pretty surprising if they had much scope for change at the bottom end. The argument from the craft brewers tends to be that these beers are about as bad as they can get already. It may be more expensive for the craft brewers to re-optimize, but they've more scope to do it. I'd still reckon they've less need to though: I have a hard time believing that demand is that responsive to an 8% price increase for the higher quality beers.
I'm not a fan of the proposed increases or of the report forming the basis for arguments favouring the tax increase. There are plenty of good arguments against the tax. I'm not convinced the small brewers have a good one here, but if they've any data on relative demand elasticities, I'm all ears.
In related news, the hubub surrounding the Palmer press conference in which he telegraphed the Law Commission's intentions apparently has led our big supermarket chains to start engaging in price fixing on alcohol. Some folks thought the supermarkets were using alcohol as a loss-leader and wanted regulation to stop such behaviour; I tended to figure that buying in exceptionally large volume explained price differences between supermarkets and some liquor outlets. The Hospitality Association has argued for banning of the use of loss leaders (or just getting alcohol out of supermarkets entirely) - anything to raise your rivals' costs with the patina of social responsibility, eh?
But no matter. The problem, such as it was, is now solved. Matt Nolan, who's sat on his hands about the BERL report, weighs in here and here. Brad Taylor usefully points to Yandle (the young Sith apprentice learns well); Walker (who only supports antitrust legislation when it could have a big effect on his budget set) weighs in as well. I've little further to add.
