New York Beer Tax Hiccups
A recent debate has emerged regarding the desirability of increasing New York’s tax on beer products. Any resultant tax increase will be used to fund various public projects, including education. The current New York State beer tax amounts to a lowly 14 cents per gallon. That’s among the lowest in the nation. In a new bill, Assemblyman Harvey Epstein proposes to more than double the State’s excise tax to $0.30 per gallon. If passed, Epstein’s proposal could generate as much as $51 million annually for SUNY and CUNY schools.
Closer to the National Average
Epstein’s proposed increase would bring NY closer to the national average of state beer taxes of 33 cents per gallon, as well as make it equal to the New York’s tax on wine of 30 cents per gallon. In the debate to increase NY’s beer tax, some have referenced Tennessee’s high beer tax as a possible model to imitate, which is currently $1.29 per gallon. Accordingly, the question is whether New York should copy Tennessee’s beer tax Or, conversely, whether New York should continue to keep its beer tax relatively low.
Needless to say, we all know that the great State of New York imposes all sorts of other taxes beside a beer tax. Perhaps keeping the beer tax low is the State’s palliative solution to keeping New York beer drinkers numb to the other taxes it imposes?
The Tennessee Model
In total, Tennessee imposes a beer tax of $1.29 per gallon. The $1.29 per gallon tax actually consists of two separate excise taxes. They are paid at different levels in the chain of transactions leading to the consumer. One of these excise taxes is the “beer barrelage” tax, currently calculated at $4.29 per 31 gallon barrel of beer. Wholesalers and manufacturers operating as retailers pay this tax. The other excise tax is the “wholesale beer” tax. Wholesalers and self-distributing manufacturers also collect it. The wholesale beer tax is currently $35.60 per 31 gallon barrel. When these two taxes combine, it equals the $1.29 per gallon rate referenced above. Both of these two separate taxes are then passed onto consumers, but remitted by the wholesalers or other entities directly tasked by the State.
The Tennessee collective tax rate of $1.29 per gallon is the highest the nation. What’s more, consumers also face federal beer taxes and Tennessee state sales taxes in addition to the two beer excise taxes. This means that Tennessee consumers will pay four different layers of taxation to chug their favorite IPA.
Arguments in Favor of Larger NY Beer Tax
Un-bundling the Tennessee beer tax shows that the tax stratification there is more complex than many New York lawmakers might suspect. But the arguments in favor of raising New York’s beer tax to the level of Tennessee’s is pretty straightforward: the revenues will be substantial. In 2007 alone, Tennessee collected roughly $117 million just from the wholesale beer tax, itself. This doesn’t include the revenues generated from the beer barrelage tax.
The main impetus behind the recently proposed increase to New York’s beer tax is funding for the State University of New York and City University of New York school systems. Were New York to raise its beer tax to the Tennessee level, the State could potentially realize hundreds of millions of dollars of additional revenue. Further, given that New York is much larger than Tennessee, the State would likely see much more revenue.
Arguments Against Larger NY Beer Tax
Although the extra revenue would be useful, the arguments against imitating Tennessee’s rates are strong. For one, New York already has a slew of other taxes for consumers to deal with. There’s sales taxes, and then state and local income taxes. All these additional taxes cut into the pocketbooks of consumers pretty severely. Asking New Yorkers to absorb a much larger beer tax is likely asking too much. What’s more, if New York were to imitate the Tennessee tax exactly, this would involve splitting the tax into two separate taxes. This would mean more administrative requirements. More resources will be required to ensure that the taxes were being properly remitted. This would mean more involvement by New York tax authorities.
Contact MC&C for More Info
Imitating Tennessee’s beer tax may seem attractive upon first glance, but when we look deeper things become a bit more complicated. Tennessee’s beer tax may generate lots of additional revenue, but it comes with lots of extra complexity. Plus, New Yorkers already have plenty of taxes to deal with. At Mackay, Caswell & Callahan, P.C., we work hard to stay on top of current issues and debates which affect New Yorkers. This debate over the NY beer tax is very interesting, and it’s something we will follow closely. If you’d like more information, contact one of our top New York City tax attorneys today.
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