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San Francisco Considering Local Beer Tax

2 min readBy: Joseph Bishop-Henchman

From the San Francisco Chronicle (below the story about California lending Joe Montana and a questionable business associate $47 million to build low-income housing):

Local labor is working to put a “per drink” booze taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on San Francisco’s November ballot.

Board of Supervisors President David Chiu tells us the big question is whether the supervisors “can do the homework” in time to make the ballot deadline.

Last month we noted a separate proposal for a San Francisco local cigarette tax.

Pittsburgh’s experience with a local drink tax hasn’t been too great. As we noted with that tax proposal:

Why should alcohol and car rentals be targeted as the only possible other sources of local tax revenue? Why not tax potato chips or ketchup or even Steelers merchandise? Why not put every consumer item in a hat and pick out one item to impose a heavy tax upon? Those may sound like ridiculous targets, but they’re just as legitimate as arbitrarily picking alcohol.

If the argument is that alcohol imposes negative external costs on Allegheny County, then the tax should be levied based upon the alcoholic content, not the retail price of the item. Suppose it is Tequilla Night at the bar and drinks are only $2 while a beer is $4. There is going to be a lot more alcohol consumed in that Tequilla shot than in a beer, but by the logic of this bill’s supporters, the beer will be hit with a larger tax. If alcohol consumption is a negative externalityAn externality, in economics terms, is a side effect or consequence of an activity that is not reflected in the cost of that activity, and not primarily borne by those directly involved in said activity. Externalities can be caused by either production or consumption of a good or service and can be positive or negative. , then the tax should also apply to liquor store sales.

A final problem with this tax is the obvious issue of border shopping. A tax that is levied merely at the county level rather than at a state or federal level is much more likely to lead people to shop outside the taxing jurisdiction. This is especially true for those living right on the county line.

Politicians need to stop targeting single items for taxation (or possible taxation), despite their political appeal, and those citizens who believe in individual liberty need to ask these policymakers to explain why they want to target alcohol. Do they want to bring prohibition back? If they say no, then ask them what tax rate they would prefer and make them justify that amount on that specific item.