I was reading an article the other day about the popularity of seltzers. The article speculated that one of the reasons for their development was how they were taxed. Without getting into the details, if a similar drink was concocted with alcohol (e.g., vodka), it would be taxed at a significantly higher rate. Seltzers are produced in a process similar to beer and are taxed at a rate that is less than alcohol.
The short answer is because “they” can. Here is another example, where I currently reside, a shot of whiskey at a restaurant is taxed at twenty percent, but if a whiskey sour is ordered, it is taxed at twelve percent. Both have the same amount of whiskey in them, so why are they taxed different? See first answer.
The policies (the whiskey example is a local policy, not state or federal) of this country are often illogical. Some of these policies are punishable for violation. At the very least, these policies can be dusted off to create problems when needed. There are so many laws, rules and guidelines on the books. It is tough to keep track.
People forget, or never knew, these policies affect business creation and innovation. The challenges surrounding new product development and introduction are complicated by the daunting and potentially damning tax and policy implications. If a person wants to start a new business, most city and states have innovation centers that provide advice and a list of “professionals” that are happy to assist the new startup, for an hourly fee. The Small Business Administration’s (SBA) reach is also far and wide. Resources exist, but it is tough to get any of them to tell you exactly what you need to do to ensure compliance with all local, state and federal rules and regulations.
Try calling the IRS and asking them a question. From what I’m told, it is worse now than it was a few years ago as Covid has wreaked havoc. The citizens have allowed the law to get too complicated. Rules, guidelines and laws are created by people who were never elected by people who are no longer employed or alive. And the bureaucrats love it. It is life time job security. It just makes following the rules harder and when policies like the whiskey tax above are discovered, it can lead to a greater level of cynicism and skepticism about following any of the rules.
Many of these policies and rules are created by government bureaucrats doing God’s work. Liquor is evil, so we will tax it. It is like gambling. Gambling bad, but it makes a bunch of money, so we will allow it. But only a little and in certain areas. It is absurd. But it is not only the religious fanatics and other bureaucrats developing policy, the lobbyists are hard at work to ensure the appropriate coffers remain full. Policy is a clear method to create barriers to entry, again stifling innovation.
People continue not to care.