Breaking down the taxes on your Christmas drinks

I’m sure if your family is getting together for the holidays there will be wine, mixed drinks or beer served.  But did you know that by indulging in holiday spirits you are also paying a ‘sin’ tax?

A ‘sin’ tax is an excise tax placed on something that the government ties closely to moral or social considerations.  Because it is deemed unfavorable, the government wants to deter people from consuming it, thus the rationale for the tax.  But is that the government’s place to alter our behavior using a tax?

Taxes should be rooted in a respect for liberty and the free market – better known in economics as neutrality.  In a free society, the tax system should not be used to punish activities that are disfavored by politicians or to reward activities politicians consider virtuous.

The first excise taxes were enacted at the federal level in 1791 on distilled spirits as a method to repay the budget deficits following the Revolutionary War.  Though unpopular, the federal government also decided to tax “luxury” items such as carriages, snuff, and sugar which eventually led to the violent Whiskey Rebellion in 1794.  Excise taxes were used again to pay for the War of 1812, the Civil War, and the Spanish-American War.

Throughout history excise taxes have always lacked transparency.  In a democracy, in order to make intelligent decisions in the voting booth, people need to be aware of how much their government is costing them.  This is only possible if they are aware of the taxes they are paying.  Your holiday alcoholic drinks are a good example.

• If you serve your family and guests a beer, you are paying a federal excise tax of $0.58 per gallon PLUS a $0.31 per gallon Nebraska beer tax PLUS the Nebraska general sales tax of 5.5%
• If you decide to serve wine, you will pay a federal excise tax of $1.07 per gallon PLUS a $0.95 per gallon Nebraska wine tax PLUS the Nebraska general sales tax of 5.5%.
• But if you decide to serve guests a Christmas cocktail, you will be paying a federal tax of $13.50 per gallon PLUS a Nebraska liquor tax of $3.75 per gallon PLUS the Nebraska general sales tax of 5.5%.

Nebraska is currently ranked with the 38^th highest spirits tax, the 23^rd highest wine tax and the 20^th highest beer tax.  So, while you sit around the tree and drink spiked eggnog or have your Christmas Eve meal with wine, remember you are paying your fair share to both the state and federal government for indulging in your holiday traditions.