How much is alcohol tax

how much is alcohol tax

Center for Science in the Public Interest Alcohol Policies Project

Alcohol Excise Taxes in California

California's Budget Deficit and Alcohol Excise Taxes

California faces a deficit that will exceed $30 billion in fiscal year 2004. The state Constitution requires that California's budget be balanced. To do so, the state government can cut vital services, increase taxes, or use a combination of both. Raising alcohol excise taxes is a viable option to raise revenue.

California's excise taxes on wine are among the lowest in the United States ($0.20 per gallon for wine). Only New York ($0.19 per gallon) and Louisiana ($0.11 per gallon) have lower wine tax rates. 1 The state's excise taxes on beer and liquor ($0.20 per gallon for beer, and $3.30 per gallon for spirits) fall below the current national averages for those products.*

The Effects of Inflation on Tax Rates and Revenues

Alcohol excise tax rates, because they are set at a fixed value per volume of beverage, have steadily been eroded by inflation. As a result, "real" tax rates have declined over most of the postwar period and this erosion of real tax rates has contributed to overall declines in

real beverage prices over time. 2

Inflation has greatly diminished the value of California alcohol excise tax rates even since the last, minimal increases in 1991.** The 1991 beer tax rate of $0.20 per gallon is now worth about $0.15 per gallon; the $0.20 per gallon tax for wine is now worth $0.15 per gallon; and the tax rate of $3.30 per gallon on liquor is now worth only $2.50 per gallon.

Indexing for inflation since the last tax rate increase, the current tax on beer ($0.20 per gallon) would be $0.26 per gallon today; the current tax on wine ($0.20 per gallon), $0.26 per gallon; and the current tax on distilled spirits ($3.30 per gallon), $4.36 per gallon today.

In 2001, the State of California collected $288 million in alcohol excise taxes. Because of inflation since 1991, that amount was worth only about $218 million. Conversely, had the excise taxes been indexed for inflation since 1991, the state would have collected as much as $380 million in 2001 revenue from alcoholic beverages, an increase of 25 percent (see Table).

* Beer, $0.25 per gallon; wine, $0.77; liquor, $3.84.

** Prior to 1991, the tax rates had languished for more than 30 years.


Category: Taxes

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