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Reason Foundation

Getting a Beer in Iowa Is Tougher Than You Think

The Ames straw poll is on Saturday. You probably need a drink.

Harry Graver
August 12, 2011

As the Ames Straw Poll approaches, GOP presidential hopefuls are rolling up the sleeves of their brand new flannel shirts and scrambling to be “the guy you want to have a beer with.” But thanks to outdated regulations and onerous taxes, it’s tougher to get a beer in Iowa than you might think—no matter whom you’re drinking with.

Some of Iowa’s regulations are entertainingly anachronistic. Bartenders are prohibited from pouring water down the drain while serving an officer of the law. Don’t try asking your local bartender to put something on a tab—those are illegal, too. And if a tavern keeper is exhausted after a long day of following archaic laws? Well, he can’t open up a cold one; it’s unlawful for an owner to drink in his own establishment after closing. Candidates traveling with their families should be particularly careful in Ames—it’s against the law to have three sips of beer while in bed with your wife.

But some policies aren’t nearly as funny. Until last year, Iowa imposed a limit of 6 percent alcohol by volume on beer production, drastically circumscribing local breweries’ ability to compete in the growing craft beer market. The limit has been lifted to 15 percent, but Iowa remains in the minority of states that have a limit at all.

Small scale craft breweries are on the rise nationally as beer drinkers grow weary of big label beers. Many of these craft brewers have settled in Iowa for its excellent water sources. But even with the new rules on alcohol content, Iowa is unlikely to become a beer mecca. The Tax Foundation ranks the state's business tax climate 45th. A combination of high local and federal taxes—including tariffs on everything from the hops to barrels—makes taxes the single most expensive component in beer, according to a Standard & Poor’s study. All in all, taxes constitute 44 percent of a beer’s average retail price, a larger share than ingredients and labor combined.

Iowa is one of 19 states that retain a monopoly on distribution of alcoholic beverages within their borders, which means anyone who wants to drink or serve booze becomes a cog in a massive regulatory apparatus. (Iowa does have privatized retail operations, though.)

In addition to the regulatory environment, Iowa places a very heavy tax burden on its sellers of alcoholic beverages. Iowa not only places large excise taxes on wine (3rd highest in the nation) and beer (the highest in region, with the exception of two states). It marks up all distilled spirits by 50 percent.

Tonight, as Republican hopefuls crack open cold ones and toast to their future ambitions, they should count themselves lucky. By this time on Sunday, most of them will have hightailed it to other early primary states with booze-friendlier laws where the beer is cheaper, more plentiful, and easier to come by.

Harry Graver is a writer in New Haven. This column first appeared at Reason.com.



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