Summertime is the season of the suds, when Americans typically increase their intake of beer as they spend more time outdoors at the BBQ grill, cheering in baseball stadiums, sitting poolside or at the beach with a cooler nearby, or simply lounging in the sun of later daylight hours, often with a brewski in hand.
Whether you’re Joe Six Pack or an imported-beer snob, you’re probably paying more than you think in federal and state taxes on your cold one. According to a 2015 Senate bill languishing in committee that’s aimed at lowering federal excise taxes on alcoholic beverages, about 40 percent of the retail price of beer goes to pay state and federal taxes. According to the Beer Institute, a trade association, taxes are the costliest component in the production and sale of beer in the U.S.
States levy different levels of taxes on beer and other alcoholic beverages. According to data compiled by the Tax Foundation, a think tank that tracks U.S. tax policies, beer taxes range from a meager two cents per gallon and eight cents per gallon in Wyoming and Oregon, respectively, to a hefty 87 cents per gallon and $1.29 per gallon in Kentucky and Tennessee, respectively.
California and Texas, the two most populous states in the union, both charge 20 cents per gallon. New Hampshire, the state with the highest per capita beer consumption, charges 30 cents per gallon of beer while Utah, the state with the lowest per-capita consumption, charges 41 cents per gallon.
The tax on alcohol was one of the earliest sources of federal government revenue. The newly formed federal government agreed to assume all Revolutionary War debts as part of a series of compromises leading to the adoption of the U.S. Constitution in 1789.
Two years later, Congress passed a law to tax distilled spirits to help pay off the debt, leading to the Whiskey Rebellion and the only time a sitting U.S. president, George Washington, personally led troops to confront an enemy. Ever since this early challenge to the Constitution by disgruntled whiskey producers and consumers, the federal government has levied taxes on alcoholic beverages.
The tax on beer is part of the “sin tax” logic that assumes the consumption of certain goods – namely tobacco and alcohol – are unhealthy and superfluous, and therefore charged only to those involved in the production and consumption of these products that are indisputably linked to premature death and incur hefty healthcare and social costs – some of which are paid for by taxpayers.
The U.S. Office of Management and Budget reported that in 2017 alcohol made up 12 percent, or $9.9 billion, of total federal excise tax revenue, led by taxes on distilled spirits. The federal tax on alcoholic beverage is the fourth-largest source of federal excise tax revenue after highway-related taxes, taxes on aviation activity and tobacco product taxes. For beer, the tax is typically $18 per barrel (31 gallons), applied to the biggest beer brands in the country, and $7 per barrel for the first 60,000 barrels produced by smaller brewers, according to the Tax Policy Center. This breaks down to a tax of between 11 cents and 58 cents per gallon of beer.
The burden of this and other federal taxes varies. Some states don’t levy their own income taxes, while others have high property tax rates. Residents of New York, Connecticut, New Jersey, California and Illinois, generally pay the most in taxes overall, while taxpayers in Louisiana, Tennessee, Wyoming , South Dakota and Alaska pay the least amount in taxes of any state.
| State | Tax Rate | Rank | 2017 Per capita consumption (gal.) |
|---|---|---|---|
| U.S. | $0.58 | N/A | 26.4 |
| Alabama | $0.53 | 8 | 28.9 |
| Alaska | $1.07 | 2 | 26 |
| Arizona | $0.16 | 36 | 26.6 |
| Arkansas | $0.34 | 19 | 23.7 |
| California | $0.20 | 30 | 25.1 |
| Colorado | $0.08 | 46 | 28.3 |
| Connecticut | $0.23 | 27 | 20.2 |
| Delaware | $0.26 | 24 | 28.7 |
| Florida | $0.48 | 10 | 26.3 |
| Georgia | $0.48 | 10 | 24 |
| Hawaii | $0.93 | 3 | 28.5 |
| Idaho | $0.15 | 38 | 25.9 |
| Illinois | $0.23 | 28 | 27.4 |
| Indiana | $0.12 | 43 | 23.4 |
| Iowa | $0.19 | 32 | 31.7 |
| Kansas | $0.18 | 33 | 25.7 |
| Kentucky | $0.87 | 4 | 23.6 |
| Louisiana | $0.40 | 16 | 29.6 |
| Maine | $0.35 | 18 | 33.8 |
| Maryland | $0.54 | 7 | 20.2 |
| Massachusetts | $0.11 | 44 | 23.6 |
| Michigan | $0.20 | 29 | 25.3 |
| Minnesota | $0.49 | 9 | 28.4 |
| Mississippi | $0.43 | 12 | 30.9 |
| Missouri | $0.06 | 49 | 27.7 |
| Montana | $0.14 | 40 | 39.4 |
| Nebraska | $0.31 | 20 | 33.3 |
| Nevada | $0.16 | 36 | 32.9 |
| New Hampshire | $0.30 | 21 | 40.6 |
| New Jersey | $0.12 | 42 | 20.6 |
| New Mexico | $0.41 | 15 | 28.8 |
| New York | $0.14 | 39 | 21.9 |
| North Carolina | $0.62 | 6 | 25 |
| North Dakota | $0.42 | 13 | 38.3 |
| Ohio | $0.18 | 34 | 27.3 |
| Oklahoma | $0.40 | 16 | 25.1 |
| Oregon | $0.08 | 45 | 30 |
| Pennsylvania | $0.08 | 46 | 26.4 |
| Rhode Island | $0.12 | 41 | 23 |
| South Carolina | $0.77 | 5 | 30.9 |
| South Dakota | $0.27 | 22 | 38.2 |
| Tennessee | $1.29 | 1 | 24.4 |
| Texas | $0.20 | 31 | 31.8 |
| Utah | $0.41 | 14 | 18.7 |
| Vermont | $0.27 | 23 | 32.8 |
| Virginia | $0.26 | 26 | 24.4 |
| Washington | $0.26 | 25 | 24.7 |
| Washington D.C. | $0.71 | (6) | N/A |
| West Virginia | $0.18 | 35 | 27.4 |
| Wisconsin | $0.06 | 48 | 34.3 |
| Wyoming | $0.02 | 50 | 29.5 |
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