Echoes Dispatches From Economic History
The 21st Amendment repealing Prohibition was ratified Dec. 5, 1933. Source: ProhibitionRepeal.com
On Repeal Day, Cheers to Alcoholic Stimulus
If ever there was a time to celebrate your constitutional right to a glass of beer, today's the day.
On Dec. 5, 1933, the U.S. ratified the 21st Amendment, ending 13 years of Prohibition. What had started as a question of morality ended as a matter of economics. The country was in the midst of the Great Depression, and the government needed its liquor levies.
In 1919, the year before the 18th Amendment prohibited the sale or creation of alcoholic beverages, the government collected about $482 million in taxes. After it passed, the amendment did notoriously little to curb consumption, as American entrepreneurs found plenty of illicit ways to meet consumer demand for booze. It did, however, ensure that the profits from alcohol sales remained untaxed.
In 2009, the U.S. collected $27 billion in alcohol taxes. Policy makers often turn to alcohol-related initiatives for a revenue boost: In 2011, 12 states raised taxes on booze or changed alcohol laws to increase revenue, and in the last decade, 15 states repealed Prohibition-era laws that had banned the sale of alcohol on Sundays.
Such taxes, of course, can have unintended consequences. Making alcohol costlier can jeopardize profits for the local hospitality industry or drive consumers to buy in nearby states that charge lower rates, said David Ozgo, chief economist at the Distilled Spirits Council of the United States. The last time the federal government raised the excise tax on alcohol, in 1991, it took 11 years before the tax increase actually generated an increase in revenue. When Maryland raised its alcohol sales taxes last year, Delaware and Virginia benefited from increased sales.
Still, the taxman can celebrate today that he gets any piece of the action at all. So have a cold one for Uncle Sam.
(Kirsten Salyer is social media editor for Bloomberg View. Follow her on Twitter.)
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