Luxury Tax

In 1990, Congress approved a luxury tax on items such as cars, jewelry, and private airplanes. This tax increase doubled the tax on beer and caused an estimated 60,000 people to lose their jobs at breweries and other beer related facilities. The luxury tax has been repealed on all items except for beer. This results in the beer tax accounting for 44 percent of the retail price of beer and amounts to Americans paying $65 million per week in beer taxes. The beer tax has been shown to disproportionately effect lower income individuals.

Economic Effects

Actual beer sales decreased by three percent after the tax increase as 4.3 million less barrels of beer were sold the year after the tax hike. Beer taxes provide $3.5 billion dollars to the Federal government and an estimated $1.9 billion in revenue to states. People whose incomes are in the bottom twenty percent of the nation are affected by beer taxes five times greater than those who are in the top twenty percent in income.

Organizations

Organizations against the beer tax believe that the tax does not promote more responsible drinking habits. These organizations believe that a person’s values determine the degree to which they responsibly drink instead of the actual price of the beverage being the determining factor. These organizations believe that the doubling of the beer tax from $9 per barrel to $18 per barrel caused an economic disaster for the beer industry that took approximately five years to recover from and caused thousands of jobs to be lost as well as a decline in the nation’s overall economy.

Early studies showed a correlation between an increase in beer taxes and a decrease in the number of drunk driving incidents. At least five studies that have been conducted over longer periods of time have shown that these early findings were incorrect and that the number of drunk driving incidents has not decreased as a result of the beer tax increase.

Industry Statistics

An estimated 850,000 people are involved with the brewing, wholesaling, and retailing of beer as the beer industry creates 1.7 million United States jobs and contributes $144 billion to the economy every year.