When governments try to rig markets to achieve certain goals, they often end up getting results they didn’t foresee:
The Alberta Gaming and Liquor Commission presumably had good intentions in mind when it brewed up a policy to lend a helping hand to small breweries. Namely, beer companies qualify for substantially reduced beer tax rates on the first 200,000 hectolitres sold in Alberta. The explicit aim was to help small players compete against industry leviathans such as Molson and Labatt. And, implicitly, the tax break would entice craft breweries to set up shop in the province.
However, eight years after the reduced beer tax rates—estimated by one analyst to total about $200 million in savings—were first implemented, little in the Alberta beer business has worked out the way the AGLC envisioned. Only five small breweries have opened for business in Alberta since the policy was implemented. And in that time Alberta has, in fact, become a market characterized by discount beer. And at least one of the breweries taking advantage of the AGLC policy doesn’t even brew in the province, let alone Canada.
[. . .]
Alberta’s small brewer system would appear to be yet another case of the law of unintended consequences—especially when a government agency tinkers with the free market economy. From a dearth of craft brewers to a helping hand for American jobs, the AGLC’s beer tax policy is enough to drive a teetotalling Albertan to drink.
