Taxes, Beer and War
War has always been used as an excuse to raise taxes. The first U.S. beer tax, as mentioned, was imposed by Lincoln during the Civil War. Federal excise tax on beer has been with us ever since. It was increased again dramatically during the Korean War to pay for the cost of that conflict.
Wartime taxes on beer have also been an important source of government revenue in the U.K, where the tax on beer during World War II increased six times over its prewar levy. In April 1942, the Brewer’s Journal complained that “The tremendous heights to which taxation of alcohol beverages has now risen places these creature comforts beyond the reach of sections of our people.” (“Brewing for Victory,” p.38). Still, demand for beer did not diminish during the war, while production was seriously cut.
The Taxing Situation at Present
In the 21st century, taxes continue to play a huge role in the world of beer—even in the definition of beer itself. Thanks to their classification as “malt beverages,” so-called malternatives or RTDs (for ready-to-drink concoctions) have benefited from a lower tax rate than wine, and far lower than the spirits the companies that produce them pretend to add to the products.
In fact, these beverages may contain as little as 0.5% of the malt base that gives them their tax benefits: the remaining 99.5% is water and flavorings. However, the flavorings are also the source of the majority of the alcohol in the final drink, a fact that has the ATF looking hard at the whole tax-driven category.
Meanwhile, Standard & Poor’s DRI study released in January 2001 revealed that 44 percent of the cost of beer today is taxes alone (compared, for example, to 33 percent for bakery products). On a single $1 bottle of beer, 4% is levied on supplies, 16% on brewing, 8% on shipping and wholesaling, and 16% on retailing. The cost of production itself is 10% for supplies, 15% for brewing, 9% for shipping/wholesaling, and 22% for retailing, for a grand total of 56 percent of the final cost.