The National Council on Alcoholism and Drug Dependence fights the stigma and the disease of alcoholism and other drug addictions.

NCADD Action Alert

Addendum H.R. 52: Myths & Facts

Related to Action Alert Issued January 30, 2003

BACKGROUND

On the opening day of the 108th Congress, legislation "to reduce the federal excise tax on beer to its pre-1991 level" was introduced for the fourth consecutive Session. As with most legislation, this bill contains a preamble that includes "findings" to illustrate why the legislation is valid. This section mirrors industry propaganda on the "benefits" of this legislation and completely ignores the serious public health consequences that would result from a tax cuts on federal excise taxes on alcoholic beverages, including beer. The "findings" in the bill are outlined and contradicted below, point-by-point, with references. Developed by CSPI's Alcohol Policies Project. To view the full text of the bill, click here

MYTHS AND FACTS IN HR 52

Mythical "Finding" in H.R. 52: 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. Mythical "Finding" in H.R. 52: 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 Mythical "Finding" in H.R. 52: 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. Mythical "Finding" in H.R. 52: 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. Mythical "Finding" in H.R. 52: 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 Mythical "Finding" in H.R. 52: 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

Harwood, E.M., Wagenaar, A.C., & Zander, K.M. (1998). Youth access to alcohol survey: Summary reportPrinceton, NJ: Robert Wood Johnson Foundation.  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.  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.

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