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Happy St. Patrick’s Day – The Luck of the Beer Tax Continues

LeprechaunIt should surprise no one that the amount of Guinness consumed worldwide on St. Patrick’s Day more than doubles, to approximately 13 million pints. Celebrations are held far and wide from Australia to Russia to the International Space Station, where astronauts like Catherine Coleman play Irish music in space.

As a Maloney and a Fitzpatrick, I love the idea of a global Irish celebration - makes the world feel a wee bit friendlier (even if the saint being honored is technically Scottish).

The U.S. accounts for much of the increase in St. Patrick’s Day Guinness consumption. But while the enthusiasm may be spread out across the  country, the excise tax on beer collected by each state varies considerably.

The map created by the Tax Foundation shows an interesting pattern - a low-tax band across the middle of the country, with a few Western states collecting the least, while southern states charge the most, with Tennessee coming in first at $1.17 per gallon. The Mid-Atlantic area defies categorization – my state of Virginia is in the middle but neighboring Maryland ranks much higher.

The lowest tax states for a pint? Wyoming (dead last at two cents per gallon), Missouri, Wisconsin, Pennsylvania and Massachusetts. 

Yet, some of the higher beer tax states also assess lower income taxes. Tennessee, for example, has the 8th lowest personal income tax in the U.S. and, in fact, is ranked as having the 15th best business tax climate by the Tax Foundation. Conversely, New York has the 39th lowest beer tax but New Yorkers pay the 2nd highest income tax in the nation. Is this a coincidence or a trade off? One has to wonder. "It speaks to the strength of how much these taxes are hated," says Tax Foundation economist Scott Drenkard, that higher tax states keep this one low.

Of course, state taxes alone do not govern the final price of a pint or six-pack charged to the consumer; state policies controlling distribution and promotions, and business factors such as competition can play an important role. Also, the federal government charges an excise tax in addition to the states.

In fact, if you’re noticing the cost of celebrating St. Paddy’s has gone up, this is one you probably cannot blame on the taxman. The beer tax is probably one of the most stagnant of all state taxes. In 2011, federal researchers found that more than 20 states have not raised their beer taxes for at least 20 years, and only about 10 states have raised them in the last decade. “It’s like a large excise tax on shoes,” Drenkard observed, “it provokes a lot of outcry” when hikes are proposed. When states are struggling, he said, they turn to “sin” taxes but cigarette taxes are a more likely target.

So, for now, the Guinness is safe, thanks to the Al Bundy rule that seems to be in effect. The sales tax or the tax on your online purchase may be a different story, however. And, Drenkard noted, other types of excise tax are being contemplated in some states, such as a new soda tax in Illinois.  

But whatever your taxes may be:

May the leprechauns be near you, to spread luck along your way. And may all the Irish angels smile upon you on St. Patrick's Day.

Ann Marie Maloney, Communications Manager - Tax, American Institute of CPAs.

Leprechaun image via Shutterstock

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