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Wednesday, February 18, 2009

Comparative Beer Taxes

[Another beer tax post, yes, but one with interest to everyone in America. No apologies this time.]

It's often useful to see a whole before you try to understand a part. Thanks to data supplied by the Tax Foundation (prost to Jacob Grier), we have a decade of beer taxes. I have dumped these into an Excel spreadsheet, ignored the footnotes (tax data are incredibly byzantine--there are all manner of exceptions and add-ons and funkiness), and have a rough idea of what kind of taxes states actually assess. Given that there's a lot of talk about Oregon's obscenely low taxes, it's worth seeing them in context. Below the fold I'll include a list of all 50 states and DC. But first, here are some interesting facts.
Six Highest
Alaska - $33.17
Alabama - $32.55
Georgia - $31.31
Hawaii - $28.83
S. Carolina - $23.87
N. Carolina - $16.48

Six Lowest
Wyoming - $0.59
Missouri - $1.86
Wisconsin - $1.86
Colorado - $2.48
Pennsylvania - $2.48
Oregon - $2.60

Mean: $8.81
Median: $5.74
In this case, the median is more useful. (The median is the point that divides the group in half. If ten guys are sitting in a bar and they all make $50,000 a year and Bill Gates walks into the room, the mean income skyrockets. The median, more useful in describing the income distribution of the bar, barely budges.) Twenty-one states have beer taxes of five bucks or less per barrel. Only 13 have taxes over $10 a barrel. Only five are above $20, and three above $30 (though one member of that club, Georgia, jumped more than sixteen bucks to $31 in January).

Here's another interesting thing. It appears that there's no correlation between tax rates and per-capita consumption. (I didn't run the numbers, but did apply a few minutes of "visual inspection"--that's high-level statspeak for "eyeballing it.") States vary quite a bit by consumption, from a low in Utah of 13.4 to a high in North Dakota of 32.4. But when you sort them by the beer tax, they all average out, more or less. Have a look at the five quintiles of per-capita consumption sorted by taxes:
22.6 - lowest-taxed quintile
20.0 - second-lowest quintile
21.5 - middle quintile
22.8 - second-highest quintile
22.8 - highest-taxed quintile
21.8 - national average
(For you data geeks, I didn't average the per-capita numbers, but actually went to the state populations, since they obviously vary a lot.) Upshot: taxes don't appear to influence consumption. Hard to say whether that's a pro or con on the beer tax: discusss.

Okay, here are the state-by-state taxes. For fun, I'll include per-capita consumption as well--though the most recent data are just from '07.

Click to view table of state beer taxes...


  1. I wish there was a way of separating out consumption of craft beer from consumption of all beer versus beer tax. I wonder if the lack of correlation would still exist.

  2. Jeff,

    It gets more complicated that that.

    Let's look at Georgia. As a brewery or importer sends beer into the state to a wholesaler it's taxed at $0.48 per gallon ($14.88 per barrel). The brewery or importer usually picks up that add-on.

    ONCE the beer moves from the wholesaler's warehouse throughout the state, an additional $0.53 per gallon ($16.43 per barrel) is tacked on. That usually is paid by the wholesaler. That's the $1.01 per gallon (or $31.31 per barrel) that you posted.

    Many breweries and wholesalers assume some of this tax, but some pass it all along in the price they charge stores and pubs.

    And THEN, when the consumer buys the beer, he/she pays additional state SALES tax at the counter.

    But these figures do NOT express the original excise tax a brewery pays when it produces the beer. The Federal rate is currently at $0.23 per gallon or $7 per barrel on the first 60,000 barrels for any brewery that produces less than 2 million barrels. The 'big-boy' rate is otherwise $18 per barrel. Breweries then have an additional STATE excise tax added to the beer in the state in which the beer is brewed.

    The currently proposed national BEER act, which you and others have reported on, would reduce the Federal 'big boy' marginal rate to $9 per barrel ($0.29/gallon) and the small brewer (marginal rate on fewer than 60,00 barrels) to $3.50 per barrel ($0.11).

    It seems contradictory that the Federal government would be reducing taxes and increasing spending while states are doing the opposite. Of course, the Feds are not constitutionally bound by spending or debt limits , and can print money. States are forbidden by the US constitution from doing the latter, and are often self-prohibited from the former.

    So-called 'sin taxes' are inherently contradictory as to their competing purposes. If a perceived moral good is gained --that is, less drinking or whatever-- tax revenues are not. And vice-versa.