Federal Excise Tax
Federal Excise Tax on Beverage Alcohol
Increasing the Burden on Consumers and the Hospitality Industry
Hospitality Taxes penalize responsible, middle income consumers
- The Federal Excise Tax (FET) on beverage alcohol is one of the most regressive taxes imposed on any American consumer product.
- Beverage alcohol taxes disproportionately impact lower and middle income consumers. Households with less than $50,000 in annual income consume half of all beverage alcohol in the United States. Increasing these taxes will only further penalize low and moderate income consumers.
- Sixty-six percent of adults in families with annual incomes between $30,000 and $50,000 enjoy beverage alcohol. Forty-nine percent of households with annual incomes under $30,000 consume these products.
- It is sometimes believed that middle and lower income consumers are primarily beer drinkers. However, this notion is founded on economic stereotyping, rather than actual research. As the chart above shows, roughly the same portion of spirits, wine and beer consumers are found in each income group.
- There are well over 100 million responsible beverage alcohol consumers in the United States.
Beverage alcohol is among the highest taxed consumer goods
- Federal, state and local governments impose significant taxes on alcohol products. The amount of taxes collected at all levels of government is more than double the amount of combined profit earned by companies who retail, distribute and produce these products.
- Direct taxes on beverage alcohol imposed by federal, state and local governments account for over one-third the shelf price of distilled spirits, wine and beer. These are primarily excise and sales taxes.
- When indirect taxes and fees associated with the production and sale of beverage alcohol are included, the total tax burden accounts for more than half the price that consumers pay for most brands.
Excessive beverage alcohol taxes depress revenues and employment
- When federal excise taxes on spirits, beer and wine were last raised in 1991, they generated $2.4 billion less than Congress forecast over the succeeding 5-year period.
- The tax rate on distilled spirits exceeded the point of “diminishing return” after the 1991 increase. Spirits sales and revenues actually fell, and it took 10 years before they regained their pre-1991 levels.
- Some have proposed that the beverage alcohol tax burden be further increased by adjusting Federal Excise Taxes for inflation since 1991. If the disastrous policies of the past are repeated, economic models project a loss of 160,000 hospitality industry jobs.
Hospitality Jobs and Businesses Depend on Beverage Alcohol Sales
- The nation’s hospitality industry – restaurants, bars, hotels, retail stores and the like – derives a substantial portion of its jobs and sales from beverage alcohol. Restaurants that sell distilled spirits, wine and / or beer, for example, earn on average more than 25% of their income from alcohol sales.
- The beer, wine and distilled spirits sectors contribute a combined $350 billion to the U.S economy. Manufacturers, distributors and retailers directly and indirectly employ over 3.7 million hardworking Americans.
Soft Economy is Putting Severe Strain on Hospitality Industry
- The hospitality industry is the second largest employer in the United States, providing jobs to over 13 million workers. It creates unique opportunities for first-time job seekers, minority managers and small business entrepreneurs.
- For over a year, the industry and its employees have been under severe strain from the economic downturn. Since February 2008, hospitality employment has dropped by 421,000 jobs and the rate of unemployment in the industry now stands at 11.4 percent according to the Bureau of Labor Statistics.
- Raising taxes on such an important and hard hit economic sector will add to the nation’s unemployment rolls but will not add significant tax revenue. Beverage alcohol taxes by any name or for any purpose are unmistakably "Hospitality Taxes."
High alcohol taxes penalize responsible drinkers, not abusers
- Raising taxes on beverage alcohol only serves to penalize responsible beverage alcohol consumers and does not deter abusers for whom taxes are of little concern. The National Institute on Alcohol Abuse and Alcoholism, the government’s lead agency on alcohol issues, reported in its January 2001 issue of Alcohol Alert that research suggests the heaviest-drinking 5 percent of drinkers do not reduce their consumption significantly in response to price increases, unlike drinkers who consume alcohol at more moderate levels.