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These 5 States Tax Beer the Hardest

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Cash-strapped state governments are using every means at their disposal to collect tax revenue. Although most of the money that state and local governments collect comes from income taxes, property taxes, and general sales taxes, most states also rely on a variety of smaller but still-important sources of taxation to add to their coffers.

So-called "sin taxes" on tobacco and alcohol are a popular way for governments to raise money, and this past week, the Tax Foundation featured a beer-tax map that shows the amount of taxes that state governments collect on beer. Let's take a look at the five states that charge the highest excise taxes per gallon on beer sales, along with figures from the Beer Institute showing where they rank in terms of beer consumption.

5. Hawaii
Hawaii charges $0.93 per gallon in state excise taxes on beer. As a popular tourist destination, visitors to the islands represent a substantial addition to the beer that its residents drink, and the resulting revenue helps balance extremely high state income tax rates. With average annual per-person beer consumption of 31.2 gallons per person annually, Hawaii makes it into the top 20 states in the nation.

4. Georgia
Georgia's state excise taxes on beer amount to $1.01 per gallon. Somewhat surprisingly for such a hot state, Georgia's per-person consumption of beer finishes in the bottom 10 in the country, at just 25.9 gallons per person annually. Yet with relatively low collections of income tax, property tax, and sales tax, Georgia's tapping beer as an excise-tax revenue source makes sense for its finances.

3. Alabama
In Alabama, the state government charges $1.05 per gallon in beer excise taxes. With 30.5 gallons per person of annual consumption, Alabama isn't a huge state for beer-drinking, but it does make it into the top half of all 50 states. Moreover, very low tax rates for income, sales, and property taxes make beer-tax revenue useful.

2. Alaska
Alaska may seem like the last place on Earth you'd want a frosty cold beer, but somewhat surprisingly, the icy state weighs in right in the middle of the pack in terms of the amount of beer residents drink, at 29.8 gallons per year. Still, given Alaska's lack of a state income tax, the state government sees it as a useful revenue source, charging $1.07 per gallon in excise taxes on the beverage.

1. Tennessee
Taking top honors in the beer excise tax list is Tennessee, which charges $1.17 per gallon in excise taxes. With its state income tax applying only to interest and dividend income, Tennessee has to make up revenue from other sources, and with the state being well known for spirits like whiskey, putting more of the burden on beer makes sense for the local economy. Moreover, beer is relatively unpopular in the state, with per-person consumption of 25.7 gallons ranking among the 10 lowest in the nation.

The impact of beer taxes
State excise taxes on beer don't necessarily have a huge impact on state budgets overall, but in tough times, they still represent an important source of tax revenue, and beer producers from giants Anheuser-Busch InBev (NYSE: BUD  ) and Molson Coors (NYSE: TAP  ) down to smaller craft beer producers like Boston Beer (NYSE: SAM  ) end up bearing their share of the burden along with their customers.

Excise taxes may affect Boston Beer, but its Samuel Adams brand helped to redefine beer and kick off the craft beer revolution in the United States. Success breeds competition, though, and while just a few years ago Boston Beer had claim over most of the craft beer shelf, today the field is crowded. Can Boston Beer rise above the rest, or will it be squeezed between small local breweries on one side and global beer giants on the other? To help you decide, we've compiled a premium research report filled with everything you need to know about Boston Beer's risks and opportunities. Just click here now to find out whether Boston Beer is a buy today.


Read/Post Comments (5) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 11, 2013, at 12:42 PM, kurtdabear wrote:

    You say Georgia, Alabama and Tennessee have low beer consumption. Depending on how consumption figures were obtained, they may just have low sales, not low consumption. The are probably driving more people to cross state lines to buy beer or make beer at home. Notice that Hawaii and Alaska--two states not bordered by other states--have high and mid-range consumption. When I lived in Tenn., I bought my Tenn. sour mash bourbon in Virginia because it was cheaper there, and the trip home was only a mile longer if I veered into Virginia. It's a historic and economic fact that high taxes lead to black markets and smuggling.

  • Report this Comment On May 11, 2013, at 12:55 PM, TMFGalagan wrote:

    @kurtdabear - Thanks for the comment. I tried to look more closely at the Beer Institute data but wasn't able to find details on its exact methodology in coming up with the figure.

    best,

    dan (TMF Galagan)

  • Report this Comment On May 11, 2013, at 1:22 PM, slingblade0910 wrote:

    Kurtdabear, you went across state lines for liquor, not beer. Why would I drive any distance to buy a case of beer that would be $1.17 cheaper? A case of beer would be a gallon or so. Also, what you did with Hawaii and Alaska is what we call an association and associations do not explain causation. In other words, you are assuming with no statistical proof whatsoever.

  • Report this Comment On May 11, 2013, at 5:26 PM, DR1P wrote:

    @slingblade0910... Yes, you are correct that Kurtdabear didn't provide any proof that people from those states went across the state line to purchase less expensive beer. I don't, however, see any difference between his assuming they did and the people who did the study assuming that they didn't. How would a study determine the "per-person consumption" of alcohol? Most likely by getting the figures on how much beer was purchased in the state and dividing by the number of people who are of legal drinking age in the state. That is also making numerous assumptions.

    I have been numerous places where people would drive significant distances once or twice a month to purchase their food. The most common example I can think of is military retirees who will drive to the nearest base to use the commissary. The difference on the price, like that $1.17/case on beer, isn't a lot... but in a large quantity it can be significant. Maybe they didn't drive over there just for the beer, but if you are over there already for something else... you might as well pick up a few cases... oh hell, fill up the trunk.

  • Report this Comment On May 11, 2013, at 5:41 PM, KennnyF wrote:

    Three out of the five states on the list are in the Bible Belt and are influenced by the Baptists who oppose alcohol sales and consumption. Some areas (cities, counties, etc.) in these states are dry...meaning no alcohol sales. The locals consider alcohol taxes to be sin taxes to discourage consumption.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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