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Toby Talbot/AP

Senate Proposes Tax Increase on Alcohol in the Name of Health

May 21, 2009 08:01 PM
by Anita Gutierrez-Folch
The proposed beverage tax would help provide an estimated 50 million Americans with health insurance. But manufacturers, small businesses and consumers aren’t happy about a possible increase in price.

Proposed Taxes Take Aim at Unhealthy Beverages

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Earlier this week, the Senate Finance Committee met to find ways to pay for health insurance coverage for America’s estimated 50 million uninsured, an endeavor that could cost approximately $1.5 trillion over the next 10 years, the Associated Press reported. In addition to spending cuts, the Committee is considering increased taxes on beer, wine, hard liquor and possibly even “a new tax on soda and other sugary drinks blamed for contributing to obesity,” according to AP.
A Senate Finance Committee document describing the details of the proposed tax increase states that beer taxes would increase by 48 cents per six-pack (from the current 33 cents), wine taxes would go up to 49 cents per bottle (from the current 21 cents) and taxes on hard liquor would rise by 40 cents per fifth (from the current $2.14), according to AP. “The idea behind the proposed increases is to tax lifestyle choices that contribute to rising medical costs,” AP reported.

Reactions: Beverage manufacturers seek to protect their business

Manufacturers of beer, wine, liquor and soft drinks are already working to stop the proposals, arguing that such tax increases would “lead to job losses for workers and higher costs for recession weary consumers,” according to AP.

The blog BeerAdvocate introduced an Action Alert from the Beer Institute that calls for consumers to consider the economic impact of this potential tax increase on their lives and businesses, and to express their opposition by contacting their appropriate congressmen and senators.
Wine producers have responded by pointing out the positive health effects of wine consumed in moderation. "Singling out wine for higher taxes to reform health care is misguided because wine is part of a healthy diet and lifestyle for millions of Americans," Robert P. Koch, president of the Wine Institute, told AP.

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Background: Oregon proposes 1,900% tax increase on beer

Last month, Oregon proposed a 1,900% tax increase on beer, taking the current beer tax of $2.60 a barrel to an astounding $52.21 a barrel, The Wall Street Journal reported. The revenue is meant to cover the $3 million deficit in Oregon’s budget and allegedly help pay for a drug treatment program.

Beer production is an Oregon trademark. If the proposal is approved, the impact on the state’s economy could be fatal. According to The Journal, the 96 breweries that make Oregon the second largest microbrewery producer in the country provide 5,000 jobs and earn $2.25 billion. Kurt Widmer of Widmer Brewing Co. told The Journal that the increase would "devastate our company and small breweries throughout the state."

"This microbrewery industry has gravitated to Oregon in part due to low beer taxes," Joe Henchman, director of state projects at the Tax Foundation, was quoted as saying by The Journal.

Related Topic: Beer sales remain resilient

Stocks within the so-called “sin sector” haven’t followed the usual trend of rising in a soft economy. But the U.S. beer market is the exception, as Americans are still buying beer despite lighter wallets. During the first seven months of 2008, U.S. beer sales were up 1.4 percent since the start of the year, with more than 16 million barrels of domestic beer sold in the country during July alone, according to statistics from the Beer Institute, a lobbying group.
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