Days after the opening of the 108th
Congress on January 7, 2003, Christopher Cox (R-CA-47th)
re-introduced legislation "to reduce the federal excise tax on beer
to its pre-1991 level."
Click here to read the full text of the bill. The bill
contains a preamble or "findings" section which mirrors industry
propaganda on the "benefits" of this legislation, and ignores the
serious public health consequences that would result from a beer tax
cut. The bill's "findings" are addressed point by point, below:
"Finding"/Myth:
The 1990 Omnibus Budget
Reconciliation Act, which contained several so-called 'luxury
taxes,' increased the Federal excise tax on beer by 100 percent, to
$18 per barrel. As a result, as much as 44 percent of the retail
price of beer is now consumed by taxes.
Reality:
The "44 percent" calculation deceptively includes
sales tax, federal income and payroll taxes, state and local income,
payroll and other taxes. The Federal excise tax on beer
amounts to less than 7 percent of the average price of a six-pack,
about a nickel per drink. In fact, the relative cost of beer has
dramatically declined in the past 50 years. Even with a federal tax
increase in 1991, the average price of beer has fallen by more than
25 percent relative to the Consumer Price Index. Had the tax kept
up with inflation over the past 40 years, today's $18 per-barrel tax
would total approximately $49 today, or 84 cents per six-pack.
"Finding"/Myth:
Middle and lower-income
Americans, who comprise the vast majority of our Nation's 90,000,000
beer drinkers, cannot afford this tax on one of their few
'luxuries.' Those who would presume to indulge in the 'luxury' of
purchasing beer are now among the most heavily taxed people in our
society.
Reality:
Only heavy beer drinkers -- the 20 percent of
drinkers who consume 85 percent of all alcoholic beverages --
currently pay more than a few cents per day, at most, in beer
taxes. The Congressional Budget Office
found in a 1990 report on tobacco, alcohol and gasoline taxes that
expenditures on these items represented similar percentages of total
family expenditures across income classes.
The beer market is thriving
despite a slumping economy, and despite assertions that the tax cuts
would lower prices for consumers, brewers have not hesitated to
raise prices periodically to maximize profits. Last Fall, for
example, Anheuser-Busch increased U.S. beer prices and recorded an
8.9 percent jump in fourth-quarter profits. In four months the
company made $228 million in profits, revenue grew 2.6 percent, but
sales were up only 0.3 percent. Moreover, producers are not
concerned about "average" drinkers, because they know that most of
their revenue comes from price-insensitive heavy drinkers.
Beer taxes are popular, and large majorities in fact
support increasing the tax. Nearly 82 percent of adults
favor an increase of five cents per drink in the tax on beer, wine,
or liquor to pay for programs to prevent minors from drinking and to
increase alcohol treatment programs.1
Finding/Myth:
The 100 percent increase
in the Federal beer tax -- this so-called 'luxury tax' -- has
destroyed 31,000 jobs. It has, however, succeeded in preventing
people from enjoying this 'luxury': after the passage of the tax in
1990, total beer sales suffered the worst decline in 30 years.
Reality:
There is absolutely no
evidence to support these assertions. Bureau of Labor statistics
data indicate that between 1990-1992, the years before and after the
last federal beer tax increase, the number of jobs in malt-beverage
manufacturing and wholesaling actually rose by 1,400 net positions.
Retail jobs went down by 400. Any lost jobs will likely shift to
other sectors of the economy, since money not spent in the alcoholic
beverage industry shifts to other consumer purchases.
"Finding"/Myth:
As a result of the 'luxury
tax' on beer, $463,000,000 in wages has been lost in the brewing,
wholesaling, and retailing industries. In addition, direct
purchases of products needed to make beer, including agricultural
products, has fallen by $207,000,000.
Reality:
As a result of the 1991
beer tax increase -- the first in 40 years -- 6,600 young lives have
been saved in reduced drunk driving deaths. Industry estimates of
job and input losses are wildly exaggerated. The beer
industry is one of the few that is thriving despite a slumping
economy. The industry recorded its sixth straight annual gain in
2001, according to Adams Beer Handbook 2002.
Anheuser-Busch's stock rose 7 percent
during 2002 -- while the Dow Jones industrial average sank roughly
17 percent and had its worst yearly decline in a quarter-century.
"Finding"/Myth:
The 100 percent increase
in the Federal beer tax has not, unfortunately, resulted in a
doubling of Federal revenues. To the contrary: the decline in
demand, the resultant loss of jobs, and the reduction of direct
purchases has cost Federal and State governments hundreds of
millions of dollars in lost tax revenues. The 'luxury tax' on beer
has cost millions more in increased outlays for unemployment
compensation and other social services to help those who were put
out of work by this ill-conceived tax increase.
Reality:
There is no evidence to
support these assertions. Federal excise taxes on beer generated
some $1.7 billion in 1990, rising to $3.55 billion in 2001. The
beer market has increased, not decreased in the past decade
even as brewers have voluntarily raised prices on their own to
maximize profits. Furthermore, any decrease in sales would likely
result in a decline in alcohol problems and related health and
safety costs. Alcohol problems cost
American society more than $184 billion in 1998 in health care,
criminal justice, social services, property damage, and loss of
productivity expenses.2 Alcohol is a factor in as many
as 105,000 deaths annually in the United States and a primary
contributor to a wide array of health problems and human suffering.
These include various cancers, liver disease, alcoholism, brain
disorders, motor vehicle crashes, violence, crime, spousal and child
abuse, drownings, and suicides.3
"Finding"/Myth:
Because of the regressive
nature of the 'luxury tax' on beer, its negative impact on the
economy, and its unreliability as a source of Federal income, this
'luxury tax' should be repealed.
Reality:
Lower beer taxes would only add to the deficit, cater
to a prosperous industry, reward and encourage heavy drinking, and
attract more young drinkers, fueling increased alcohol problems and
increasing public costs. The best interests of consumers and the
public health and safety and the young people of America would be
better served by raising, not lowering beer taxes.
References:
1. Harwood, E.M., Wagenaar, A.C., & Zander, K.M.
(1998).
Youth access to alcohol survey: Summary report.
Princeton, NJ: Robert Wood Johnson Foundation.
2. Harwood, H. (2000). Updating Estimates of the
Economic Costs of Alcohol Abuse in the United States: Estimates,
Update Methods and Data. Report prepared by the Lewin Group for the
National Institute on Alcohol Abuse and Alcoholism.
3. National Institute on Alcohol Abuse and
Alcoholism. (2000). "Drinking over the life span: Issues of
biology, behavior and risk." In: 10th Special Report to the U.S.
Congress on Alcohol and Health. Bethesda, MD: U.S. Department
of Health and Human Services, pp. 1-66.
January 28, 2003
