These States Have the Highest and Lowest Alcohol Taxes

If there’s one thing U.S. politicians love, it’s a good
old-fashioned sin tax. These days everything from soda to fireworks
gets the sin tax treatment, but booze is the OG of unfairly taxed
vices in America. And this shows no signs of abating, according to
a new report from the Tax Foundation. The
organization highlights
how beer, wine, and spirits are taxed around the country,
including which states have the highest and lowest alcohol taxes
and whether these taxes increased or decreased last year. 

Not many have been decreasing. In 2013, only a handful of states
lowered taxes on beer, wine, or spirits, and most by miniscule
amounts. The good news, I suppose, is that there weren’t many booze
tax hikes either. But that’s little comfort considering how high
some of these taxes already are.

In Washington state, for instance, residents
pay an extra $35.22 per gallon to state coffers when they buy
any sort of spirits. And crossing the border to neighboring Oregon
won’t help much—it boasts the second-highest spirit tax, at $22.73
per gallon. Rounding out the top five are Virginia ($19.19),
Alabama ($18.23), and Arkansas ($12.80).

The latter two states have the distinction of making it into the
top five for highest taxes in all three alcohol categories. In
Alaska,
beer is taxed at $1.07 per gallon, second only to Tennessee,
with a $1.17 per gallon beer tax. Alabama has the third highest
beer-tax rate ($1.05 per gallon), followed by Georgia ($1.01), and
Hawaii (93 cents).

And Kentucky
takes top billing for wine taxes, adding an additional $3.56
per gallon to the price of wine. It’s followed by Alaska ($2.50 per
gallon), Florida ($2.25), Iowa ($1.75), and a tied Alabama and New
Mexico ($1.70).

Only two states—Wyoming and New Hampshire—decline to tax spirits
altogether. They also join Utah, Missouri, and Pennsylvania in
keeping wine sin-tax free. But you’ll find beer taxes in all 50
states and Washington, D.C. According
to The Beer Institute, “taxes are the single most expensive
ingredient in beer.”

The Institute also notes that beer taxes are regressive.

“Instead of taxing equitably across all income groups, beer
taxes place a much heavier burden on low- and middle-income
taxpayers than on the rich. That’s because many more beer drinkers
are men and women with modest incomes rather than wealthy
people.

An analysis by the Beer Institute found that households earning
less than $50,000 per year pay half of all beer taxes, while
accounting for less than one-fourth of all income earned in the
U.S. Beer taxes are actually 6.5 times higher as a percent of
income for lower-income households (those earning less than $20,000
per year) compared to higher-income households (earning $70,000+
per year). The tax on beer is thus one of the most discriminatory
of all taxes in the federal and states’ tax codes.”

Since the
Tax Foundation’s 2013 report, only two states have lowered beer
taxes (Washington state down from 52 cents to two cents; Minnesota
down one cent). Twelve states decreased excise taxes on spirits,
while one (Minnesota) slightly decreased its tax on wine. 

Meanwhile four states (Mississippi, Montana, Utah, and Vermont)
raised taxes on spirits. North Carolina, Arkansas, Kentucky, and
D.C. all raised beer taxes (North Carolina by nine cents, the rest
by two cents). North Carolina also hiked its wine tax by 21 cents
per gallon, while Kentucky added 40 cents to its already prodigious
wine tax.

The Tax Foundation notes that there isn’t much consistency on
how state and local governments tax alcohol. Some tax a fixed rate
per volume; others mandate wholesale taxes that are a percentage of
the product’s price. Tax rates also include distributor taxes
(generally structured as license fees), retail taxes and bottle
fees.