Drinking and Taxes

There is a proposal being considered by the European Union that would tack an extra one cent tax on every half liter of beer produced, which has brewers in several countries up in arms. The tax hike is a 31 percent increase, which proponents say would catch the tax up with the rate of inflation since it was last raised 14 years ago. Tell that to the 2.6 million people who work directly or indirectly for Europe's 3,000 breweries.

A penny per mug might not sound like much and the inflation argument is the same that neo-Prohibitionist groups in the United States have been trying to use to boost taxes on alcohol in this country for a number of years. That logical falls as flat as a day old draught beer when you look at the facts.

I'd like to offer a little disclaimer. I'm not an anti-government, anti-tax fanatic. I pay considerable amounts in income, property and sales taxes, not to mention various government fees and excise taxes on everything from beer to gasoline. I'm not against paying my fair share for national defense, safe roads, sound education and taking care of the old and the young. I know that I pay for more services than I use, but that does not bother me in most cases. Like most Americans, I do get a little upset when I see tax dollars wasted or programs so poorly managed that in the real world of the private sector they would labeled criminal. Frankly, I get offended when I hear groups like the Center for Science in the Public Interest and the Marin Institute suggest we're all not paying our fair share in taxes on the beer, wine and liquor we consume.

The tax collector already has a pretty good grip on my glass. On the federal level, they collect $18 per 31 gallons of beer, meaning I pay 30-cents per six pack in excise taxes to Uncle Sam. (Although brewpubs and microbrewers who make less than 2 million barrels annually pay just $7 per barrel on the first 60,000 barrels they make, so I guess the hit early in the year is slightly less.) If I decide to have a glass of wine, I pay 21-cents to the federal government per bottle if the wine is under 14% alcohol or if I'm in a celebratory mood, 67-cents for a bottle of sparkling wine. If I decide to have a drink of Bourbon, the federal excise tax on the bottle will cost me $2.14.

If these were the only taxes we paid on adult beverages, none of us would really have much to complain about. However, state and local governments get involved with everything from taxes on alcohol to sales taxes on the retail purchase we make. According to DISCUS, a trade group for the spirits industry, 57 percent of the purchase price for the average bottle of vodka, rum, whiskey or other spirits that you buy is actually federal, state and local taxes. Depending on where you live the tax bite can be pretty painful.

Consider Connecticut for a moment, where the sales tax is 6 percent. They have a state tax on spirits of $4.50 per gallon, 60-cents per gallon on wine and 19-cents per gallon on beer. That's pretty high, but it pales in comparison to a state like Alabama, which controls alcohol sales in the state through a state store system. In addition to a 4 percent state sales tax, Alabama charges $14.78 per gallon in taxes on spirits, $1.70 per gallon on wine and 53-cents per gallon on beer. The state tax coffers must swell on weekends when the Universities of Alabama or Auburn have home football games. Alaska, which does not have a state sales tax and has the reputation for low tax rates because of oil revenue, charges $12.80 per gallon for spirits, $2.50 for wine and $1.07 for beer. Some of the lower state tax rates on alcohol can be found in places like Kentucky, Maryland, Missouri, New Hampshire, North Dakota, Texas, Vermont, West Virginia and Wyoming.

Want to learn what your state charges? Check out www.taxfoundation.org/variousrates.html or http://www.taxpolicycenter.org/TaxFacts/TFDB/TFTemplate.cfm?Docid=349&Topic2id=90. The numbers will likely cause you to need to reach for a cold one.