You are here

Congress on the Verge of Lowering Beer Taxes

By today’s standards, the Founding Fathers were outright lushes. Ben Franklin was apocryphally known for his love of beer (although it turns out wine was his drink of choice), Washington had a prolific whiskey distillery, John Adams began every day with a glass of cider, and John Hancock was infamous for his prodigious beer drinking. Thomas Jefferson even supposedly completed the first draft of the Declaration of Independence in a Philadelphia tavern. He might’ve spit his drink on the floor, though, if he had to pay what liberated Americans today pay in alcohol taxes.

There’s no doubt, over the last five years advocates have made great strides liberating their states from prohibition-era rules; all 50 states legalized home beer brewing as of 2013 (though home distilling is still a crime), Washington privatized alcohol sales, and the number of breweries in the country finally reached and surpassed the level of the pre-Prohibition industry. Pennsylvania’s liquor control board, the PLCB, even approved 6-pack sales at gas stations (though I’ll be happier when they abolish the PLCB entirely). Despite all of this, though, regulation at the federal level not changed much since the end of Prohibition. 

In 1862 Congress enacted the Tax Act, implementing taxes on alcohol, among other things. The purpose was to pay for the Civil War, yet more than a 150 years later, we drinkers are still on the hook. As Forbes’ Kelly Phillips Erb recently noted:

…the alcohol industry has long been relied upon to bring in tax dollars. For perspective, in 2013, the alcohol industry generated $7.9 billion in federal excise taxes (that doesn’t include state and local excise taxes). Today, excise taxes make up about 3% of federal receipts – and that doesn’t count taxes on production, distribution, and sale of alcohol: when it comes to beer, those taxes eat up 40% of the retail price. While the federal excise tax is about 5 cents per drink (assuming that the average beer has an alcohol content of 4.5%), the actual tax rate is $18 per barrel of beer, or 10 cents per ounce of alcohol.

You read that right: the price of your beer is nearly half taxes. While state taxes take a big bite out of your beer budget (local taxes, too, if you live in a city like Philadelphia), federal alcohol excise taxes add to the burden.

There is, however, a proposal sitting in Congress that would, if not repeal the federal alcohol excise tax, lower it on beer. The bipartisan Craft Beverage Modernization and Tax Reform Act (H.R. 2903), which would lower the federal excise tax rate, is supported by both the small and large brewers and also has the approval of more than half of the House of Representatives.

For small brewers (those making fewer than 2 million barrels a year) the bill would reduce the excise tax from $7 a barrel to just $3.50 for their first 60,000 barrels; a huge boon to the 90 percent of breweries in America than produce fewer than 8,000 barrels a year. For medium-sized producers, those making between 60,000 and 6 million barrels a year, their rate will fall from $18 a barrel to $16. According to the Beer Institute, this means that 98 percent of breweries will see their federal excise tax cut in half. The bill also reduces paperwork for the smallest breweries and allows greater freedom for breweries to collaborate.

And more than half of the members of the U.S. House of Representatives (253) and nearly half of all Senators (45) have co-sponsored the bill. Lowering the tax would allow the industry, which supports 1.75 million jobs, to reinvest their money into the U.S. economy and, hopefully, lower the cost of America’s favorite beverage. T.J. would probably rather see us in open rebellion until Congress repealed the federal excise tax altogether, but lowering it is a good (and less bloody) first step. So, as you sip your beer or wine or spirits this Fourth of July weekend, raise a glass to the Founders and the libations that helped them create this great nation, and to you—the drinker—who paid for a lot of it through your taxes, but who will hopefully not have to pay so much in the near future.