Higher Beer Taxes Unfair, Regressive

Published November 1, 2003

You probably didn’t know this, but a staggering 44 percent of the cost of the average beer is taxes. And the situation is getting worse.

The problem is the government spending binge that’s still underway in many states. A report released earlier this year by the National Conference of State Legislatures (NCSL) found that despite some budget cuts and tax increases, too many states continue to overspend for the third straight year. Twenty-seven states currently have budget shortfalls.

Failing to make much progress in curbing spending, at least 19 states are considering increases in taxes and fees, according to NCSL. So far this year, NCSL reports, six states have raised cigarette taxes and two have raised beer taxes. This is on top of an already aggressive tax regime for those legal products.

All 50 states already levy an excise tax on the sale of beer. Some cities and counties levy their own taxes as well. There’s a multiplier at work, too, because most states and many local governments also impose a general sales tax, which is added to the final tab at the register.

Pennsylvania, home of Iron City, Rolling Rock, and a good number of beer drinkers, is the flashpoint for the fight over beer taxes. After all, western Pennsylvania farmers led the Whiskey Rebellion in 1794 in opposition to punitive federal taxes on whiskey stills. Fast forward to 2003, where Keystone State Governor Ed Rendell wants to raise taxes on beer, more than tripling the state tax from 8 cents to 25 cents.

In March, Congressman Phil English (R-Pennsylvania) introduced H.R. 1305, a bill to repeal the federal “luxury” tax on beer. English has the right idea–policymakers and the public should support repealing beer taxes, not raising them.

In 1990, Congress voted to raise taxes on goods like luxury automobiles, furs, jewelry, yachts, and private airplanes, and to double the federal excise tax on beer from $9 to $18 a barrel. These “luxury” tax hikes destroyed tens of thousands of jobs and nearly wiped out the U.S. boat-building industry. The 1990 tax increase also cost 60,000 people their jobs in the brewing, distributing, and beer retailing industries, according to an analysis by DRI/McGraw-Hill. Congress recognized the sheer stupidity of the luxury tax increases and has since repealed them–except for the “luxury” tax on beer.

Beer excise taxes are unfair and regressive, hitting poorer consumers hardest. According to Citizens for Tax Justice, people whose family incomes are in the bottom 20 percent pay a tax burden from beer excise taxes five times greater than people with family incomes in the top 20 percent. More than half (52 percent) of all beer is purchased by families with incomes of $45,000 or less. And now states want to increase this tax. Where is the liberal outrage?

States and the federal government have an insatiable appetite for new spending, and they especially love to tax the working man’s favorite drink: beer. It’s time to give Joe Six Pack a break.

Chris Kinnan is director of public affairs for Citizens for a Sound Economy.

For more information …

visit the Citizens for a Sound Economy Web site at http://www.cse.org.