Cheers! The Tax Costs of Bringing in 2020 with a Toast

Just as there is no such thing as a Free Lunch in economic lingo, the same is true (almost) that there is no such thing as a Tax-Free Toast in the U.S. to bring in the New Years.  It is timely on this New Year’s Eve to look at the taxes on that glass of bubbly you may hoist tonight.  Taxes, after all, are an unfortunate component of daily life.   As usual I invoke  the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market.  The same is true about tax rates.  They vary from state-to-state and across countries,

As I wrote in the Stewart Blog in 2014: “Right up front, let me admit this is a little far stretching for a real estate economist blog – but it is the end of a long year, so bear with me. The timing is appropriate. Since its New Year’s Eve, let’s focus on Champagne. Champagne taxes, that is.”

Looking back 100 years ago, there were no taxes on the ceremonial glass of bubbly – since no alcohol  was legally available given prohibition.  That has all changed today.

The Tax Foundation, a non-profit located in Washington, D.C., annually releases a study comparing Champagne taxes (sparkling wines) for each state, based on data from the Wine Institute.  The following table shows the Excise Tax Per Gallon by state.  Data are sorted both by state and by Excise Tax, ranked from most to least.  These include sales taxes specific to alcoholic beverages, converted wholesale tax rates, and case and/or bottle fees where applicable.   In addition to and not included in these tax rates would be normal retail sales taxes applicable to all goods.

Florida, the highest-taxed of the states at $3.50 per gallon is light-weight in comparison to some of the European Union.    While the U.S. taxes are based on one gallon of wine, European taxes are per Standard Size Bottle of Sparkling Wine, which equals 0.75 liters or 0.20 gallons.   The Tax Foundation also does an annual study of Excise Tax on Sparkling Wines across Europe.  The following table shows the conversion to $US based on an exchange rate of €1.00 = $US 1.12 and to gallons for the EU countries with a Sparkling Wine Excise Tax.  Florida’s $3.50 per gallon is minuscule compared to the $35.67 in Ireland, $17.42 in Great Britain or $16.69 in Finland.

All European Union countries also assess a Value Added Tax (VAT) which varies from 17 percent in Luxemburg to 27 percent in Hungary.  The Value Added Tax would be in addition to the listed taxes in the above table.

To read the entire Tax Foundation study on Sparkling Wine taxes click https://taxfoundation.org/new-years-eve-champagne-taxes?utm_source=Tax+Foundation+Newsletters&utm_campaign=db46b320bc-EMAIL_CAMPAIGN_2018_04_18_COPY_01&utm_medium=email&utm_term=0_8387957ec9-db46b320bc-427662773&mc_cid=db46b320bc&mc_eid=c79ab314e3

For the European Union Tax Foundation study click https://taxfoundation.org/new-years-eve-in-europe-sparkling-wine-taxes?utm_source=Tax+Foundation+Newsletters&utm_campaign=db46b320bc-EMAIL_CAMPAIGN_2018_04_18_COPY_01&utm_medium=email&utm_term=0_8387957ec9-db46b320bc-427662773&mc_cid=db46b320bc&mc_eid=c79ab314e3

European VAT tax Rates can be viewed at https://taxfoundation.org/vat-rates-europe-2019/

Taxes imposed on sparkling wine will likely make no difference to those bringing in the New Year’s with a toast, but the added costs over the full year no doubt impact consumption.

I raise my glass of sparkling, naturally flavored seltzer water (with no Excise Tax) to toast y’all.  Happy New Years.  Here’s to a safe and prosperous 2020.

Be sure to toast responsibly.

Ted

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