Some groups contend that "alcohol is alcohol" and that taxes on beer, wine and hard liquor should be "equalized" -- that is, taxed at a rate based solely on alcohol content. Under this scheme, beer taxes that were already doubled in 1991 would be raised again, from $18.00 to $37.67 per barrel, or even higher.
There are many historical, social and economic reasons why America's tax policy was set up to differentiate between a domestic product -- beer -- and other types of alcohol beverages. These factors should be weighed carefully before our federal tax policy is changed to accommodate the proponents of equalization.
Consider the following:
- Beer is a domestic product that creates American jobs. Raising beer taxes while leaving liquor untouched would favor a largely foreign-owned industry -- which imports a great deal of its products -- over an overwhelmingly domestic industry supporting almost 2.7 million jobs.
- Any increase in the federal excise tax on beer would have an adverse impact on beer industry jobs and the approximately 80 million working men and women who consume beer. Close to 31,000 jobs were lost as a result of the doubling of the beer excise tax in 1991.
- Salaries for employees in beer-related jobs (excluding fringe benefits and pensions) total over $50 billion. Besides this enormous economic contribution, the industry generates nearly $14 billion in taxes alone. Higher beer taxes would adversely impact U.S. workers and the national economy.
- Beer taxes are regressive for taxpayers. Today, almost all states, the federal government, and virtually all developed nations tax alcohol beverages progressively. That is, beverages of weaker concentration are taxed at a lower rate, per unit of alcohol, than beverages that are highly concentrated. In fact, when compared in terms of consumer cost-per-ounce of alcohol, beer is already more expensive than liquor.
- Equalization would unfairly hurt lower- and middle-income consumers and increase the overall regressivity of the federal tax system. Compared to liquor, beer purchases are disproportionately made by people from lower-income families.
- The "alcohol is alcohol" message of equalization proponents conveys that all alcohol beverages are the same and can be consumed without regard for their alcohol content. This message is confusing. In the real world, a drink containing hard liquor often has far more alcohol than a single 12-ounce beer. Telling consumers that they can safely drink martinis or any other mixed drink the same way they drink beer isn't just wrong, it's dangerous.
For over 200 years, America's federal and state tax and regulation policies have recognized beer as the beverage of moderation and have treated beer, wine and liquor differently. This recognition of the real differences between beer and liquor should not be ignored or disregarded, as proponents of equalization would suggest.
But careful thought about the historic, social and economic -- and even global -- implications of changing the current tax treatment of alcoholic beverages reveal that increasing beer taxes in the name of equalization would be a major mistake. Indeed, a true form of parity among alcohol beverage taxes, one that reflected the very real and important differences in packaged concentration among the beverages, would result in a dramatic reduction in beer excise taxes. Rolling back the 1990 increase in beer excise taxes would be a great start, and an effective way to deliver tax relief to the 80 million working men and women who drink beer.