How beer taxes saved America

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EIGHTY years ago this Sunday, the federal government enacted a law that targets beer drinkers with a mean-spirited tax on every bottle, every glass, every sip they take.

In the decades that have followed this ignominious date, the law has taken billions of dollars out of our pockets, killed jobs, thwarted brewery expansion and threatened the middle class.

Beer lobbyists today describe the law as “devastating” and “regressive.” They say it jeopardizes the entire industry.

Just another example of greedy tax-and-spend politicians, right?

Until you realize that the law they’re griping about is the very one that legalized beer on April 7, 1933, and led to the end of Prohibition.

Can I get a hoo-rah, anybody?

As breweries and bars celebrate the anniversary this weekend, it’s easy to forget that Prohibition ended mainly because its opponents argued – convincingly – that the legalization of alcohol would create much needed tax revenue.

Remember: This was the time of the Great Depression. Roosevelt had been sworn in to office in early March with a new Congress that was promising economic reform immediately.

It would take months, though, for the states to ratify the 21st Amendment, to fully repeal Prohibition and bring back our liquor. So Congress instead came up with a measure that aimed at the despised Volstead Act, which had limited alcohol in so-called non-intoxicating liquor to a measly .5 percent. Under its new bill, beer could contain a relatively bracing 3.2 percent alcohol.

This law wasn’t named something like “The Bill to End the National Nightmare” or the “Happy Days Are Here Again Act.”

No, they called it “A bill to provide revenue by the taxation of certain non-intoxicating liquor.”

FDR signed it into law just two weeks after his inauguration, mainly because it carried a $5 per barrel tax – a tax, its sponsor promised, that would “go a long way toward helping to alleviate distress and suffering in this country.”

Taxing booze was hardly a novel idea at the time. Before Prohibition, it’s estimated that almost a third of all federal revenue came from liquor taxes. Likewise, the promise of a return of liquor taxes (along with the hoped-for elimination of the federal income tax) would be a key element in the effort to ratify the 21st Amendment.

In Last Call: The Rise and Fall of Prohibition, author Daniel Okrent writes that in the first year after repeal, though many states still remained dry, alcohol taxes brought in more than $250 million in taxes – “instantly, nearly 9 percent of total federal revenue.”

I offer this little history lesson because the Brewers Association, which represents small breweries, was in Washington last week, pushing legislation to reduce the beer excise tax.

Currently, most of its members pay $7 per barrel in federal excise taxes. (Large brewers, like Anheuser-Busch, pay $18.) They want to cut the rate to as little as $3.50.

The organization calls the reduction of the excise tax “the top legislative priority” for its members.

Pardon my guffaw, but as “top legislative priorities” go, this one ranks down there with electing a new crop of Philadelphia Traffic Court judges.

Never mind that breweries are fortunate they haven’t been forced to keep up with the price of inflation. If they had, their excise tax would be closer to $90 a barrel.

Instead, just do the math: $7 per 31-gallon barrel in excise taxes equals less than 3 cents per pint.

I’m having a hard time understanding – in an age when craft beer costs me six bucks a pint – how the excise tax is somehow “devastating.”

So, go ahead, raise a mug this weekend and celebrate the 80th anniversary of the return of beer. But remember, it came with a price.


Speaking of 1933, here’s a reminder that the National Constitution Center’s excellent exhibit “American Spirits: The Rise and Fall of Prohibition” (which the photo to the left comes from) closes its long run on April 28. If you haven’t caught it yet, it’s totally worth the price of admission.

Tickets are available online or at the door.

Tonight, the center hosts Cheers to Beer, a toast to the Beer Act of 1933. Tickets start at $35 and include samples from local breweries.


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