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Beer Today, Taxed Tomorrow

Kelly Phillips ErbApril 6, 2010

When legislators across the country took steps to increase the tax on soda, many taxpayers shrugged their shoulders. After all, it’s just soda.

But now, now lawmakers are getting serious. They’re talking about increasing the tax on beer. (I know.)

And not just anywhere: the increase is planned for one of the microbrew capitals of the US: the state of Washington. Of course, that might explain why microbrews would be exempt from the tax.

The new tax proposal from the Washington Senate would bump the tax on big-brand beers to nearly 50 cents per gallon, or 43 cents per six pack. The tax currently stands at about 15 cents per six pack. Officials estimate that it would raise an additional $58 million for the next fiscal year (if you do the math, it means that Washingtonians consume about 207 million six packs of bad big-brand beer each year).

Despite the increase in the beer tax, the revenue raised would merely dent the estimated $2.8 billion budget deficit in the state. So, also on tap is a *temporary* surcharge on service businesses – from state to state, service businesses are fair game this year, it seems.

Washington is also considering a *temporary* sales tax increase to 6.6% (up from 6.5%). And like Pennsylvania, the plan is to expand the sales tax base to include candy and gum – as well as bottled water.

One wonders how many times the legislature can use the word *temporary* to describe their tax packages before they all just grab their sides and bust out laughing… I think it’s a fair question.

At any rate, this bit of news raises several issues, not the least of which is whether the microbrew exemption can escape a legal challenge. I’m calling it now: expect at least one serious threat of a lawsuit over the constitutionality of such an exemption (it has protectionism written all over it).

A vote is planned for Friday and Senate Democrats believe they have enough votes to push the beer tax increase through, noting that beer is “discretionary.” But apparently only big-brand beer. I guess that makes microbrews a necessity?

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Kelly Phillips Erb
Kelly Phillips Erb is a tax attorney, tax writer, and podcaster.
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4 thoughts on “Beer Today, Taxed Tomorrow”

  1. Evan says:
    April 6, 2010 at 9:11 pm

    How do you think this is going to work in terms of just helping out local microbrews at the detriment to large interstate conglomerates?

    Reply
  2. RSR says:
    April 7, 2010 at 12:54 pm

    At the federal level, rates increase with volume (I guess that’s ‘marginal’ like income tax rates?), so I think varying rates might pass muster if done that way.

    There’s also a separate movement to lower the excise tax on the lower end of the scale, benefiting the smaller brewers:

    H.R. 4278, a bill introduced in December 2009 … would redefine the ceiling defining a small brewery and reduce the beer excise tax for small brewers from $7 to $3.50 on the first 60,000 barrels of beer production. It would also reduce the tax on beer production between 60,001 and 2 million barrels by $2, from $18 to $16. All brewers large or small would pay the full current rate of $18 on any beer produced over 2 million barrels in any given year.

    http://www.examiner.com/examiner/x-241-Beer-Examiner~y2010m3d15-Congress-proposes-halving-small-brewers-beer-excise-tax

    Reply
  3. Michele says:
    April 7, 2010 at 6:57 pm

    Why are microbrews exempt? So how much is beer tax now? Do six pack beer shops have to pay beer tax?

    Reply
  4. Best Beer says:
    September 29, 2010 at 1:32 pm

    I don’t think it is right to increase the tax on beers. I believe that any products must have just the same tax. What do you think of this? Do you think this can effect the beer industry much?

    Reply

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