Taxing the Keg

An Analysis on the Potential Effects of Changing the Federal Excise Tax on Beer

Beer and the federal taxation of alcohol have brewed an interdependency in American history since the eighteenth century. In the last forty years, however, the advent of the craft beer industry has profoundly shaped the brewing landscape in the United States. In response to this change, Congress has proposed alternative pieces of legislation that would amend the Internal Revenue Code and the federal taxation of beer: the Brewers Excise and Economic Relief Act (“BEER Act”) and the Small Brewer Reinvestment and Expanding Workforce Act (“Small BREW Act”). The BEER Act would make broad cuts to the existing excise tax, favoring large and small breweries alike. The Small BREW Act, by contrast, would reform the excise tax modestly, benefitting small breweries only. This Note explores the future of the federal excise tax on beer and its potential impact on the brewing industry and society at large. It begins by detailing the history of brewing in the United States, as well as specific changes the BEER Act and the Small BREW Act would have on the existing excise tax. This Note will then perform economic analyses on the two acts using theoretical and comparative approaches. In doing so, it will detail the foreseeable impacts of the BEER Act and Small BREW Act and consider the health implications of each proposed law. This Note urges that Congress adopt the Small BREW Act. The Small BREW Act’s targeted tax cuts for small breweries will enhance market competition and foster sustained success of craft beer businesses. Given its limited scope, the Small BREW Act will also minimize losses of federal excise tax revenues and curtail the health and societal concerns associated with this proposed tax reform.

The full text of this Note is available to download as a PDF.