Beer Tax Hike on the Horizon?

Josh Elliott-Traficante

A proposed hike on the Beer Tax hike would push New Hampshire’s rate to nearly four times that of Massachusetts. The state Beer Tax is currently assessed on brewers at $0.30 per gallon sold, with the cost passed on to consumers. HB 168, introduced by Reps Charles Weed and Richard Eaton, would increase the beer tax by $0.10 per gallon, putting the tax at $0.40 per gallon. This would make New Hampshire’s Beer Tax the 13th highest in the country, (up from 19th) and the highest in the North East. Massachusetts, in comparison, has a rate of only $0.11 per gallon.

The Fiscal Note for the bill projects that the revenue raised would be in the range of $4.25 million, which is an extrapolation of current revenues at an increased taxation rate. However, as studies have shown, while demand for alcohol remains inelastic in response to tax increases, the alcohol tax revenue is elastic.

In other words, people do not drink less in response to tax hikes; they get their alcohol from elsewhere, either legally by crossing state lines, or illegally through smuggling and backyard stills. That is not to say that I expect moonshiners to set up shop in the back woods of the state, but more people will travel to Massachusetts in particular to buy their beer, rather than here in New Hampshire.

In fact, New Hampshire is already losing out to Massachusetts. The state does not charge sales tax on alcohol, which puts it on an even playing field with New Hampshire, but the higher Beer Tax rate in New Hampshire tips the balance in Massachusetts’ favor. Though there is a deposit across the border, it is by definition refundable. The result is that an increase in the Beer Tax would drive even more business across the border, at the cost of small businesses, not only through the loss of sales on beer, but on collateral sales as well.

There is also the question of from whom the tax is being raised. Like most sin taxes, the beer tax is regressive, by some accounts even more regressive than the cigarette tax. So while the state would raise in the neighborhood of 4 million more in revenue, it would come from those who could least afford it.