You can cry in your beer if you want to.
But you might have to pay more for that beer — more every single year — before you start the crying.
In the next few weeks, the federal excise tax on alcohol will rise. It rose last year, too. It’s rising this year because the federal government, in last year’s budget, decided to pass legislation building a constant increase to the tax, an increase tied to the consumer price index.
In the federal budget, it looked like this: “Budget 2017 proposes that, to maintain their effectiveness, excise duty rates on alcohol products be increased by 2 per cent effective the day after Budget Day, 2017, and that rates be automatically adjusted to the Consumer Price Index on April 1 of every year starting in 2018.”
It’s a sneaky way to increase taxes without actually having to tell anyone you’re doing it.
Some might argue that a lot of taxes do that already: if you’re in a tax bracket that pays, say, 17 per cent income tax, and your income rises, so does the actual amount of tax you pay.
The different thing about the excise tax? It will rise even if the price of your product stays the exactly the same, so the customer will see a higher price, but that money will go to the government, not the producer. At least in the income tax model, you still get to keep part of your increased pay.
In a sense, the excise tax change institutionalizes tax increases. And it’s bad politics.
Beer makers are making the most noise about it right now, arguing that almost half of the price of beer is taxes, and the escalation of the excise tax alone is a 1.51 per cent increase that will then be piled on with matching increases in provincial liquor sales price markups and HST.
The federal government looks to be planning the same thing for weed as well, saying in the 2017 federal budget, “As the government moves forward with a new taxation regime on cannabis, it will take steps to ensure that taxation levels remain effective over time.” (In case you hadn’t realized it, “effective over time” is a euphemism for “constantly increasing.”)
The problem?
Well, the most obvious one is that as well as institutionalizing the tax increases, the move camouflages them. Governments won’t have to publicly say they’re increasing a tax and bring those tax changes forward to the House of Commons and to public view.
It might be true that, as Benjamin Franklin said, there is nothing certain except death and taxes. But building in a permanent escalator?
We’d have to change the saying to “nothing is certain, except death, taxes and automatic tax increases.”
When a government increases a tax, it has to justify that increase.
