Differentiating Between Alcohol Beverage Products

Recent Congressional Action on Alcohol Taxes 

In 2020, Congress again codified the differential in federal excise tax rates for beer, wine, cider and liquor. These rates were previously enacted on a temporary basis in 2017 under the bipartisan Craft Beverage Modernization and Tax Reform Act 1. These permanent rates continue a longstanding congressional recognition of differentiation between beer, wine and liquor. Liquor industry efforts to remove these distinctions are inconsistent with current law, as well as public health and policy principles regarding alcohol.

Liquor and Beer are NOT the same

  • Vodka, whiskey, gin and tequila are not the same as beer. The average alcohol by volume (ABV) of liquor (distilled spirits) is approximately 40%, while the average ABV of beer is approximately 5%.
  • Congress has recognized the fundamental differences between beer and liquor. For example, the Federal Alcohol Administration Act contains different regulations for liquor versus beer as well as different regulations for breweries and liquor manufacturers. The tax code also has consistently taxed liquor at a higher rate than beer or wine.

Health Concerns are Inherently Different Between Liquor and Beer

  • Differences in taxation reflect the concentration of alcohol in the different products. Due to its higher concentration, liquor can intoxicate more quickly. Counterfeit liquor can be fatal to consumers, as happens in some countries outside the U.S.2
  • According to the Centers for Disease Control and Prevention, approximately 2,200 people die each year from extreme alcohol consumption.
  • A cocktail served at a bar and a cocktail packaged in a can are both liquor-based and the packaging should not change the federal tax rate.

The U.S. Beer Industry Contributes More to the Economy

  • The U.S. beer industry creates significantly more jobs, contributes more to wages and salaries and has a more significant impact on gross domestic product (GDP) than the liquor industry. Even as liquor’s market share continues to grow, its effective tax rate is significantly reduced by government credits and refunds from rum cover over and drawbacks and MNBP loopholes that currently exist in the tax law.
  • Today, there are more than 13,300 permitted breweries in the U.S., helping drive trade and economic activity. The U.S. beer industry supports more than two million good-paying, local jobs and contributes more than $330 billion to our economy. Brewers and beer distributors directly employ nearly 210,000 Americans, and each job in the brewing industry generates another 30 jobs in other industries, including farming, transportation and hospitality. The impact of the beer industry is equivalent to 1.6% of the U.S. GDP.