Excise tax on beer

In 2025, the aggregate real excise tax on beer is estimated at $0.60 per gallon, reflecting a continued decline in its real value due to persistent inflation and unchanged nominal rates. As the cost of beer rises, the tax constitutes a smaller share of the retail price. Over the past year, the excise tax fell by 2.6%, highlighting inflation's impact on fixed nominal tax rates.

From 2020 to 2025, the aggregate excise tax on beer declined at an annualized rate of 3.9%. This trend is driven by the permanent enactment of provisions from the Tax Cuts and Jobs Act (TCJA), which lowered the federal tax rate for brewers and importers. In 2021, the federal component was $0.43 per gallon, while the median state contribution was $0.20 per gallon, with significant disparities among states. The TCJA initially provided temporary tax relief, reducing federal rates for small brewers and larger producers. These reduced rates became permanent in late 2020. Consequently, nominal federal excise tax rates dropped, and inflation compounded the real decline. The aggregate excise tax fell 6.7% in 2022 and continued downward in subsequent years.

Other macroeconomic trends, including steady increases in beer retail prices, have further contributed to the real decline in excise taxes. Inflation has significantly decreased the purchasing power of static nominal taxes.

By the end of the period, the excise tax has become a decreasing component of overall beer pricing due to policy changes and macroeconomic forces. The cumulative effect of the TCJA and inflation has reduced the real tax burden, declining at an annualized rate of 3.9% from 2020 to 2025.