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Neglected and Outdated State Beer Taxes

Want to know what the beer tax rate was in your state during the FDR Administration? If you're from Wyoming you won't have to look hard, since the tax rate has not changed there since 1935. While Wyoming may win the prize for having neglected its beer taxes the longest, most other states also have extremely low beer tax rates and have lost much of their beer tax rates' real value.
  
Beer tax rates are too low in every state, even in states with recent increases. Even the highest rate in the nation, $1.07/gallon in Alaska, is still extremely low, especially compared to other nations. The solution, of course, is to raise the beer tax, and index it to inflation to protect against future losses. With almost every state in the nation struggling to find revenue to fund much-needed programs, it's time for state policymakers to increase the beer tax rate.
  
The map below shows the current beer tax rate for each state, along with the year the rate was last increased, and how much inflation has diminished the value of each state's tax since the year it was last raised. Scroll over each state to see its data.



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Bottom of the Beer Barrel: 12 States With Worst Tax Rates

State
Current Tax Rate
(per gallon)
Year of Last Increase Decrease in Real Value Revenue @ 10 cents per drink increase
 Wyoming  $0.02 1935 94% $15.3 million
 Pennsylvania    $0.08 1947 90% $333 million
 Kentucky $0.08 1954 87% $87.2 million
 Idaho $0.15 1961 86% $33.4 million
 North Dakota      $0.16 1963 86% $20.9 million
 West Virginia   $0.18 1955 88% $45.2 million
 Michigan $0.20 1966 85% $216 million
 Louisiana $0.32 1948 89% $129 million
 Mississippi $0.46 1950 89% $80.2 million
 Georgia $0.48 1964 86% $201 million
 Wisconsin $0.06 1969 83% $167 million
 Missouri $0.06 1971 81% $150 million

 

About the Worst Beer Tax Data
The table above provides the underlying data for the twelve states with the "worst" beer tax rates in the nation. To find these states, three criteria were used: current tax rate (per gallon), the year of last increase, and the percent decrease in real value. Three states: Wyoming, Pennsylvania, and Kentucky ranked at the bottom of the list for all three criteria. Seven states: Idaho, North Dakota, West Virginia, Michigan, Louisiana, Mississippi, and Georgia ranked in the bottom for two of the criteria (year of last increase and decrease in real value). An additional two states, Wisconsin and Missouri, complete the list of the five states with the lowest beer tax rates. The amount of potential revenue from increasing each state's tax rate by 10 cents per drink was generated using the Alcohol Justice Alcohol Tax Calculator.

Years Since Last Increase
What you could buy for $1.00 in 1950 would cost you $8.93 in 2008. This is because over time, inflation causes prices to rise. However, beer taxes are not linked to inflation. Instead, they remain constant until they are increased through policy action. Some states have not updated their excise tax rate for decades, which means inflation has taken a huge bite out of its value. More than half of the states have not increased their excise tax rate in twenty years or more. Because of this, state tax revenue collections suffer.

Erosion Due to Inflation
Because beer tax rates are not indexed to inflation, their real value drops over time. In other words, excise tax revenues essentially decline each year. Inflation has diminished the value of each state's beer tax since the year it was last raised. The erosion of each state's beer tax rate was calculated as the percent change between the excise tax rate and its real value, when deflated from 2009 back to the year it was last raised. For instance, California's beer tax rate of 20 cents per gallon has lost 37 percent of its value since it was last raised in 1991.

Data Sources
1. Year of last increase, as of 2010. 
2. Excise tax rates were deflated using annual CPI data through 2009, the most recent year for which annual inflation data were available.
3. State beer excise tax rates and historical changes were obtained from the Brewer's Almanac and Adams Beer Handbook.
4. Alcohol Justice Alcohol Tax Calculator


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