Tuesday, November 26, 2013

What's wrong with this picture?

Before you read any further, click on this link to an Omaha World Herald story concerning needed changes in Nebraska's liquor laws regarding craft breweries. I won't quote the whole story here, but after you've read it, click back here and get my take on it. Then join in with your point of view in the comment section.

The response by Hobert Rupe, director of the Nebraska Liquor Control Commission is wrong on many, many levels. It just goes to show what happens when bureaucrats forget they are there to represent the interests of the citizens not to protect their little fiefdom or act as toadies to big business.
So far as he can tell, Nebraska's craft beer industry is doing just fine. “I was a little bit incredulous that there was a problem when you have 20 breweries and 14 more opening,” he said.
So, rather than listening to the people who know - those who have struggled through the maze of unfriendly regulations, he comes up with a quote like “It's worked since 1936.” Mr. Rupe might I ask - anything different in today's economy since 1936? Any modernizations in technology that might make it easier to regulate the taxation of breweries since 1936?

State governments across America are beginning to understand the economic impact of small, local craft brewers. Their own organization, the Council of State Governments wrote in an article entitled "The Macroeconomics of Microbreweries - Craft Beer Makers May be Small, but They Boost Jobs, State Revenues"
Craft brewers provided almost 104,000 jobs and created $8.7 billion in retail sales across the country in 2011. According to state brewing associations, craft brewing contributed $3 billion in total economic impact in California in 2011. In Texas, it generated almost $76 million in sales and $16 million in state and local tax revenue.
In order to capitalize on the trend, states are streamlining regulations and smoothing the way for craft brewers to come online. Why?
“Craft is what I like to call delightfully inefficient,” Havig said. “There’s a lot of tiny producers, all have really inefficient brewing processes. With those delightfully inefficient processes, we require a lot of people, a lot of time and lot of materials and we produce really interesting $5 bottles of beer. … These are good, solid, family-wage jobs.”
What could be better for rural Nebraska? Lots of tiny producers, each employing just the right number of locals, using locally produced raw materials, providing "good, solid, family-wage jobs."

At the Nebraska Travel Conference recently concluded in Norfolk, we learned that the Nebraska Passport Program had around 20,000 participants in 2013. And what was the most popular tour? Tap Into It, which featured eight of those 20 breweries that were currently online in 2013. When those visitors traveled to those small rural towns scattered throughout Nebraska, do you think the only thing they did was stop and have a beer? While I have no way of backing up my claim, I'll bet many also ate, maybe filled their car up with gas, visited other attractions, purchased some locally made goods, maybe even spent the night. All which contributed serious economic activity into local economies.

So just what are craft brewers asking for that has the Nebraska Liquor Control Commission up in arms? For starters, how about a reduction in the excise taxes on beer? Though Mr. Rupe claims that Nebraska's 31 cent a gallon excise tax is "about middle of the pack" nationwide is pretty close to the truth - we rank 21st according to the tax foundation, our surrounding states are at the other end of the spectrum: Colorado, 46th with .08 cents; Iowa, 31st with .19 cents; Kansas, 32nd with .18 cents; Missouri, 49th with .06 cents; Wyoming, 50th with .02 cents. With Governor Heinemann's current push to reform Nebraska's tax structure, with the understanding that lower taxation actually brings an increase in revenue, it's high time we applied this theory to craft brewers.

What else are they asking? The ability to distribute their own product, just like grape growers do when they turn their raw materials into wine. That's the issue that Rupe pointed out has been working since 1936. And guess who is lobbying hard for the status quo?
Joe Kohout of the Associated Beverage Distributors of Nebraska said that the current system is “an effective way” to collect taxes and a way to encourage diversity, since distributors offer a wide variety of products.
Requiring craft brewers to try to pry open the door of a beverage distributor which by nature favors quantity over quality, "encourages diversity?" Really?

Though it wasn't covered in the article, I'll tell you another change that needs to be made to Nebraska's liquor laws. Develop a "native" liquor license for Bed and Breakfasts and small local restaurants. Very inexpensive as compared to the full liquor license, even a wine and beer license, and it only allows the on or off sale of Nebraska produced wines and beers. Visitors are looking for authentic local experiences, which is why they choose a Bed and Breakfast and a small hometown cafe as opposed to a chain restaurant. Economically these folks operate on a tight margin. It's just not feasible for them to pay hundreds of dollars for a full liquor license, when in reality they probably won't even sell that dollar amount of alcohol. In addition to only including Nebraska produced wine and beer, it could also be tied to gross revenue of the establishment, maybe on a sliding scale. There are a lot of ways that it could be done, and it would benefit not only the individual business, but the local community and the wine and beer producers across the state.

ShareThis