The Beer Institute recently reported some happy news: 51 U.S. senators support a bill to lower federal drink taxes. The Craft Beverage Modernization and Tax Reform Act of 2015 (S. 1562) would:

The bill also would enact several other reforms, including reducing some tax-related reporting requirements and defining “cider” so that fizzier versions are not subject to pricey sparkling-wine taxes (cider is taxed at 22.6 cents per gallon and bubbly is taxed at $3.40 per gallon).

Whether the legislation will be passed and sent to President Barack Obama’s desk is anything but clear. On the one hand, it is an election year, and what better way for an elected official to please the folks back home than by cutting taxes? Additionally, the companion House legislation (H.R. 2903) has 284 cosponsors; only 218 votes are needed to pass it.

But the hurdles to lower drink taxes are not insubstantial. Neither the Senate nor the House bill has been reported out of committee, and Congress is not spending much time in session this autumn. Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Paul Ryan (R-Wis.) both would need to find floor time, which is scarce, to move the bill. And lest it be forgotten, it usually takes 60 votes to get legislation through the Senate, which means another nine supporters need to be scrounged up.

The legislation also faces two other basic challenges. First, it may come with budgetary costs. To date, the Congressional Budget Office has not scored the bill, but the tax cuts quite possibly will create budgetary red ink.

The second and more fundamental issue is that the legislation leaves in place most of the inequities in drinks taxation. The amount of alcohol is the same in a 12-ounce beer, a 4-ounce glass of wine, and a 1.5-ounce measure of liquor, but the taxes are wildly different. For each ounce of alcohol they contain, liquor is taxed at 21 cents, wine at 8 cents, and beer at 10 cents, according to calculations by the Congressional Research Service. For no good reason, sparkling wine is taxed three times as heavily as regular wine.

Indeed, the whole system of alcohol taxation is fundamentally irrational. As a result, any drinks legislation inevitably pits the various drinks-makers against one another. Thus, some members of Congress continue to voice support for other bills that offer other proposals to make drinks taxes less unequal.

The obvious solutions are to either abolish alcohol taxes entirely, or to tax each alcoholic beverage based on the amount of alcohol it contains. Perhaps one day a brave legislator will propose one of these reforms. The tax man may hate it, but the thirsty electorate will cheer.

Photo by pil76

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