Taxes and Beer

                                                                 by Linda Maldenato
                                                         

Tax day has just come and gone so it might not be too upsetting to take a look at the long relationship between
taxes and beer.

.Egypt was likely the first civilization to tax beer. Queen Cleopatra imposed a tax on beer in order, she claimed, to
discourage public drunkenness, though it is believed that the tax was used to raise money to fund a war with
Rome.  We know how that turned out.

Beer is the most popular alcoholic beverage in the United States. According to a recent Gallup poll, 40% of
Americans who drink alcohol say they prefer beer, down a few percentage points from last year. In 2017, the
federal government collected over $3.6 billion in excise taxes on domestic and imported beer alone.  That's a lot
of beer .......and money.

In 1695, Great Britain raised taxes on beer, making gin the cheapest beverage in England. Gin was taxed at 2d
(about 2 pennies) per gallon, while beer was taxed at 4 shillings 9d (about 57 pennies) per gallon. The difference
in price is considered the root of a serious drinking problem in the country in the 18th century, especially among
the poor.  After all Gin was not only cheaper but stronger.

In the United States, taxes on the production, distribution, and sale typically eat up 40% of the retail price of beer.
That amount includes all taxes imposed on beer. In previous years, the federal excise tax was about 5 cents per
drink (the nickel comes from the assumption that the average beer has an alcohol content of 4.5%).  So net time
you say the price of beer is too high you know the right group to blame.

If you thought tax reform only lowered income taxes, you'd be mistaken. The new law reduced the federal excise
tax on beer according to output. Those rates were reduced to $3.50 per barrel on the first 60,000 barrels for
domestic brewers producing fewer than 2 million barrels annually and $16 per barrel on the first 6 million barrels
for all other brewers and all beer importers; the excise tax remains at $18 per barrel rate for those producing over
6 million. If those rates sound familiar, they closely mirror previously proposed legislation, including the BEER Act
of 2013. There is one downside: Under tax reform, most corporate changes are permanent and most individual
changes are effective through 2025, the changes affecting the beer market will expire in 2020.

To help pay for the Civil War, Congress imposed an excise tax on beer. The Revenue Act of 1862, signed into law
by President Lincoln, included a tax on "all beer, lager beer, ale, porter, and other similar fermented liquors, by
whatever name such liquors may be called." It may not be popular but taxing beer wasn't a bad idea from an
economic standpoint, as it generates billions in revenue each year.  And remember the nation at that time did not
have an income tax.

Arthur Guinness II - the father of Guinness stout - altered the family beer recipe to include unmalted roasted
barley instead of black malt. The unmalted barley wasn't subject to extra taxes which made it affordable for the
Guinness family - it also made the beer's taste distinctive. By the end of the 19th century, Guinness was the
largest brewery in Europe.  Chalk up one good thing we have because of taxes.

According to the Beer Institute, last year, directly and indirectly, the beer industry employed nearly 2.23 million
Americans, providing more than $103 billion in wages and benefits. The industry pays nearly $63 billion in
business, personal and consumption taxes.  Uncle Sam can't complain over those numbers..

In 1991, President George H.W. Bush signed a bill which raised taxes on luxuries such as furs, yachts, private
jets, jewelry and expensive cars (despite his "no new taxes" pledge) - that same bill nearly doubled the tax on
beer. Bush called for the repeal of the tax just two years later, and while most of the taxes included in the bill were
eventually repealed, the tax on beer remained in place and is still there today.  No wonder he wasn't re-elected.

The most expensive state to buy a beer may be Tennessee where state excise taxes reach a whopping $1.29 per
gallon, plus sales tax, making it the highest in the country. The cheapest state to buy a beer? Wyoming, where
the excise tax is just $.02 per gallon.  It might be time to move.

According to Infogroup, with 1.54 beer-related businesses per capita, Bend, Oregon is the most favorable U.S.
city for beer lovers. Oregon boasts two cities on the list. It probably helps that Oregon has no state sales tax to
boost prices.  Forget Wyoming, it's time to move to Oregon.

Sales of craft beer increased 8%, up to $26.0 billion, according to the Brewers Association, and now account for
more than 23% of the beer market. California leads the way, boasting 2.2 breweries per 100,000 adults over the
age of 21.  Unfortunately they also are among the leaders in high tax rates.

In addition to sales of beer, "beer tourism" is a real thing. Sites like BrewTrail.com help consumers plan road trips
and vacations around visits to breweries, which bring additional travel tax dollars. States and regions have gotten
into the spirit, offering info on their own "ale trail" recommendations. Beer drinkers travel for beer and the state
benefits.  It's win win.





(based on an article by Cat Wolinski)0
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