The next time you pour yourself a cold one, give yourself a pat on the back in the name of patriotism. On average, 40 percent of the price you paid for that beer is going straight to Uncle Sam and the state.
Lobbyists in Washington are pushing to reduce those taxes, at least by a few cents. The Beer Institute is supporting legislation cleverly titled the BEER Act, which would reduce the federal excise tax from $18 per 31-gallon barrel (an amount that doesn't actually exist; a keg is 15.5 gallons) to $9 for large brewers. Smaller operations would pay nothing in excise taxes on the first 15,000 barrels they produce, while kicking in a mere $3.50 through 60,000 barrels.
The most expensive ingredient in beer is taxes, say industry lobbyists. (The Beer Institute)
Passing the bill would not only (slightly) reduce the cost of beer, but could also lead to an uptick in the number of breweries in the United States. The industry, which the Institute has tracked since 1887, has been growing rapidly in the last two decades, thanks in part to tax breaks for small brewers.
The chart below shows the number of legally operating breweries in the country over that period (thus the zero total during Prohibition). The original excise tax dates back to the 1800s, when the U.S. government imposed a small, temporary tax to help pay for the cost of the Civil War. That tax became permanent in 1933, as a "sin tax" imposed in the wake of Prohibition.
"We don't think we're a sin, we're not like tobacco. This is just good living," Beer Institute Vice President of Communications Chris Thorne argues over a cold glass of [redacted], laughing. (Thorne is prohibited from playing favorites among the Institute's many members. When at any event with representatives from multiple breweries, he plays it safe by using a nonbranded glass and telling each of them, "I'm drinking your beer.")
In 1977, Congress reduced the excise-tax rate for small brewers (those producing fewer than 2 million barrels per year) by $2. Over the next few years, the number of breweries began to tick up, until 1991 when Congress greatly increased the excise tax on larger breweries (to the current $18 rate), while leaving small operations alone. During that period, small breweries like Anchor Steam in San Francisco and New Amsterdam Brewery exploded across the U.S.
The number of breweries in the United States since 1887. (The Beer Institute)
Further reducing the excise tax could lead to an even bigger influx of small producers, the Beer Institute argues, while providing larger operations like Anheuser-Busch and MillerCoors more room to grow. In other words, lobbyists argue, passing the BEER Act would not only reduce the cost of beer, it would create jobs.
But that's not how everyone sees it. The Congressional Budget Office has argued in favor of raising the excise tax, noting that the costs of alcoholism and alcohol-related incidents far exceed the revenue brought in by taxes on beer, wine, and spirits. "When adjusted for inflation, current excise tax rates on alcohol are far lower than historic levels," CBO argues. "In the 1950s, excise taxes accounted for nearly half of the pretax price of alcohol; they now account for between 10 and 20 percent of the pretax price."
Meanwhile, the National Institute on Alcohol Abuse and Alcoholism points to a 1997 study that found that raising the federal excise tax on beer would greatly reduce the number of drinking and driving incidents in the United States. According to the study, "adjusting the Federal beer tax for the inflation rate since 1951 would reduce the probability of nonfatal traffic crashes by almost 6 percent for both men and women."
But Thorne argues that raising the federal excise tax harms the vast majority of beer drinkers who aren't abusing alcohol or causing accidents. "First of all, we support [the legal drinking limit of] .08 [percent blood alcohol content]. We believe that the vast majority of accidents, and with alcohol abuse, are with repeat offenders and high-BAC drunk drivers."¦ We believe that these are representative of a smaller part of the population. Increasing taxes not only captures the 95 percent of consumers who are drinking responsibly and asking them to pay for it, but if you're a problem drinker, it doesn't matter. The taxes are not going to stop you from consuming. That's proven too," Thorne said.
The BEER Act to reduce those excise taxes has 91 cosponsors in the House (45 Democrats and 46 Republicans). But once again, it seems to be going nowhere fast. The website GovTrack gives the BEER Act a zero percent chance of passing this Congress and only a 1 percent chance of making it out of committee. To wit, when asked about the bill on Thursday, Rep. Jim McDermott, D-Wash., who signed on as a cosponsor just the day before, laughed and said: "What's the BEER Act?"
For now, the bill is stuck in the Ways and Means Committee, which has been a little preoccupied with releasing a draft of a massive tax-reform overhaul — which, like the BEER Act and so many other pieces of legislation, seems unlikely to hit the floor this year. McDermott, who sits on Ways and Means as well, said there hasn't been much talk about the BEER Act since it was referred to the committee last May.
"There's not been a single word. I mean, that's why I asked what it was.... I mean, remember, we passed 38 bills this year. We've done nothing. We haven't had hearings, we haven't done anything," McDermott said.
Even Rep. Tom Latham, R-Iowa, who introduced the bill last year, admits it's unlikely to go anywhere. "Well, we're hopeful, but I don't see any legislation moving forward," he said.
Although they're advocating for a reduction in excise taxes, the status quo is just fine by the Beer Institute. "We pay more than our fair share already. We're not saying, for the majority of the industry, protect our carve-out. We're just saying don't tax us any more than you already are," Thorne says.
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