Excise tax on distilled spirits

In 2025, the real aggregate excise tax on distilled spirits in the United States is estimated at $11.62 per gallon, marking a significant decline. Despite unchanged nominal excise tax rates at both federal and state levels, rising retail prices and ongoing inflation continue to erode the real value of these taxes. Consequently, the share of the retail price accounted for by excise taxes is lower than in previous years, reflecting a broader trend of diminishing tax significance in the distilled spirits market.

From 2020 to 2025, excise taxes on distilled spirits have been influenced by legislative changes and inflationary pressures. The Tax Cuts and Jobs Act (TCJA) of 2017, effective in 2018, reduced the average federal nominal excise tax for producers from $13.50 to $9.85 per gallon. This resulted in a 27.1% nominal and 22.9% inflation-adjusted drop in 2018. Subsequent years saw unchanged nominal rates, but real tax values continued to decline due to inflation. Estimates suggest a real annualized decline of 3.5%, reaching $12.90 per gallon in 2024. By 2025, the rate has decreased further. Minimal state-level changes did not significantly alter the median nominal state excise tax, which moved slightly from $3.75 to $3.77 per gallon post-TCJA, remaining stable through 2025. Regional differences persisted, with states like Washington and Alaska imposing higher rates than those in the Southeast, Maryland, and Washington, D.C.

Broader inflation and increased consumer prices significantly decreased the real value of fixed excise taxes. As the retail price of distilled spirits rises, a fixed per-gallon excise tax becomes a smaller part of the overall product price, reducing its fiscal impact and influencing producer and consumer behavior. Outside the initial TCJA implementation, no major changes to federal or state excise tax policies occurred, though some states used temporary increases to fund specific projects.

From 2020 to 2025, the excise tax on distilled spirits experienced a 5.3% cumulative decline, shaped by the TCJA's effects, inflation, and minimal state rate changes. Inflationary pressure remained the primary driver of real declines, diminishing the role of excise taxes relative to retail prices and industry revenue.