Congress Considers Beer a Luxury--But Not Mink Coats, Private Jets, or Yachts

Congress Considers Beer a Luxury--But Not Mink Coats, Private Jets, or Yachts
September 1, 2005

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

President George H.W. Bush and Congress in 1990 raised a host of excise taxes on "luxury" items including expensive cars, fur coats, jewelry, yachts, and private airplanes. Included in the list of luxury items was beer, which at the time saw a doubling of the federal excise tax, from $9 to $18 a barrel.

Fifteen years later, the taxes on expensive cars, fur coats, jewelry, yachts, and private airplanes have been rolled back. The beer tax remains, even though the main purchasers of beer are lower- and middle-income consumers. Taxes make up an astounding 44 percent of the retail price of beer, according to the Beer Institute.



Tax Cut Proposed

Some lawmakers want to roll back the beer tax to its 1990 level.

"The tax burden on beer is far higher than the average consumer good in the American economy," said Sen. Rick Santorum (R-PA) when he introduced legislation earlier this year to roll back the beer excise tax. "As a result of this tax the government collects approximately seven times more in beer taxes than the nation's brewers make in profits."

In April, Santorum introduced legislation to amend the Internal Revenue Code. Since then, his measure has attracted 140 House sponsors and nine Senate sponsors. In a statement announcing his bill, Santorum noted, "All of the other luxury taxes enacted in 1990 have been repealed. Yet the beer tax increase remains in place."

He said if the beer tax were rolled back, the federal government would still collect almost $3.7 billion in excise taxes and the industry would pay $21 billion in other federal, state, and local taxes.



House Already Approves

Two hundred forty Congressmen--a majority--signed on as sponsors of legislation to roll back the beer tax in the 108th Congress, but lack of support in the Senate kept the legislation from advancing.

Beer industry representatives hope Santorum's new bill will spark a serious push to reduce the tax in the months ahead. They also hope the federal legislation sends a message to state lawmakers to hold off on further state beer tax increases.

"We've been lobbying for a tax rollback for a long time," said Michelle Semones, public affairs director at the National Beer Wholesalers Association. "The chances of the Santorum bill being passed as a stand-alone bill are probably slim, but it could be rolled into a larger tax-cut bill.

"Having the bill out there sends a clear message to the states that the federal government is not for increasing taxes on beer," said Semones. "While the federal government is not going backward, it's also not going forward with increasing the beer tax, and there's a chance a rollback could be included in tax-cut legislation."



60,000 Jobs Lost

Semones said the beer industry estimates the excise tax increase has resulted in the loss of nearly 60,000 jobs in brewing, distributing, retailing, and related industries.

"They're hurting not just those in the beer industry but also retailers and consumers, because it is a regressive tax," she said. "Beer consumers are middle- to lower-income, so they really are targeting Joe Six-Pack."

Jeff Becker, president of the Beer Institute, which represents brewers, said he finds irony in the excise tax situation.

"When you look at the menu of taxes that were passed in 1990, and see that the beer tax is one of the only ones that hasn't been rolled back, it's hard to understand," he said. "Yachts, private planes, fur coats, they're all rolled back. When the Bush administration began talking of tax cuts six years ago, we said, 'If you want to give tax relief to lower- and middle-income people, this should fit perfectly.'"


Steve Stanek (stanek@heartland.org) is managing editor of Budget & Tax News.

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)