Why the 'escalator' beer tax won't really hurt your wallet

Headlines about a new beer tax may have you worried about paying more for your next pint, but some experts say you won't even noticed the "escalator tax" at least not for a while.

Just putting the words "beer" and "tax" side-by-side makes people nervous, said Toronto beer writer and expert Jordan St. John.

"People tend to freak out," he saidin an interview with CBC News. "For the average beer drinker, it will not matter at all."

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The federal excise tax which means it targets beer makers specifically is currently $31.84 per hectolitre (100 litres). It will increase to $32.32 per hectolitre this April and then will go up each year based on inflation.

Industry lobby group Beer Canada argues "runaway taxation" on beer will impact "beer lovers and beer makers from coast to coast."

"Imagine being stuck on an escalator going up and up and up, and you cannot get off, and you cannot make it stop that's what beer lovers in Canada are facing with this escalator tax. We need people who love beer to help us axe the escalator tax," George Croft, Beer Canada chairperson and president of Kitchener-based Waterloo Brewing, said in a release.

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But St. John said the numbers don't add up to it being a big deal.

"In order for this to cost the average consumer a dollar a case, it will take until April 1, 2040," he said.

"People who are not yet born will be drinking age before this costs anybody a dollar a case."

Costs passed on to consumers

It's not much money, agreed Joe Lesica, an assistant professor of economics at Wilfrid Laurier University in Waterloo, Ont.

But he said the larger brands of beer will pass on those costs to consumers.

"Who consumes more of those big manufacturer beers, like Molson and Sleemans? It's probably the poorer consumer, the lower-income consumers tend to consume more of the big brands and less the pricier craft beers," Lesica said.

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He also warned a dollar in 2018 won't be worth the same in 2040.

"I wouldn't just offhand dismiss this as like, 'Oh, it's a nickel or a dollar, so it's not that big of a deal,'" he added, noting craft breweries have a lower tax, which benefits higher income people who tend to consumecraft and microbrews.

The amount to the cost of a pint of beer would be about half a penny, which is less than what you can pay in actual currency.- Jordan St. John, beer writer

"It's not this year, but then eventually, because of the built-in tax increase,it may start reflecting on the shelf price of beer."

St. John agreed the larger breweries are the ones that will feel the pinch on this increasing tax.

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AB InBev, which ownsLabatt, and MolsonCoors, will take one of the hardest hits.

"If you make a very large amount of beer, then that starts to add up," he said, but he also said there's no reason they need to pass the cost on to consumers.

"Molson Coors had a third-quarter net sales of $2.88 billion last year. I think they can handle it."

Taxes addup

Steve Innocente, president and head brewer at Innocente Brewing in Waterloo, said he will be able to handle the increase in the tax. Currently, as a craft brewery, he paysabout $3 per 100litres of beer in federal excise tax.

The provincial tax on the same 100 litres of beer is $403, and that was raised in the past few months, he said.

"That didn't raise anyone's ire," Innocente said of the provincial tax going up, adding all of their costs to make craft beer already expensiveto make continue to rise.

"There's taxes on top of taxes, then there's payroll tax, then you have your HST on top of that. It adds up."

The breweryraised prices for bottled beer 18 months ago and Innocente said he'strying to avoid raising prices again, but he hopes customers will understand if his has to increase prices.

"People don't always understand what you have to do to keep the doors open," he said. "We're trying to find savings wherever we can."

Tax won't change buying habits

Federal Conservative Leader Andrew Scheer has joined the Beer Canada call to "axe the tax." On his Facebook page, Scheer called the tax hikes "unfair" and said it will make it harder for "local breweries and producers to invest in their businesses and communities."

St. John said the tax has become an issue because of the lobbying by Beer Canada.

"It's a manufactured problem," he said, noting the excise tax was raised in 1991 and again in 2006 and breweries didn't see another increase until 2017.

If you're buying a pint of beer at a restaurant or bar, "even if it was a macro-produced product where the brewers are paying a lot of federal excise tax comparatively speaking, the amount to the cost of a pint of beer would be about half a penny, which is less than what you can pay in actual currency," St. John said.

Those small increases will add up over time, raising the cost of a case of beer. But while people may grumble about the price going up 10 or 15 cents, Lesica said it won't be enough to stop people from buying beer.

"That's probably what the government is thinking, you're not going to change your beer buying habits and the tax is going to get collected," he said.