The effects of Prohibition - Part 01 - Tax

At 12:01 a.m. on April 7, 1933, breweries in the United States heralded the return of beer.
Throughout the night before (fondly dubbed "New Beers Eve"), beer drinkers lined up outside breweries, anxious for their first taste of legal beer.

In Milwaukee, where crowds were said to have been over 50,000 at the breweries, beer drinkers hauled away their precious kegs and cases in everything from wheelbarrows to baby carriages.

In New York City, movie houses played the newly-released film, "Beer Is Back!"

Around the country, night clubs, hotels and restaurants; most filled beyond capacity; struggled to keep the taps flowing as raucous crowds downed an amazing 1.5 million barrels of beer during the first 24 hours that beer was back.

But in the next day, beer drinkers and brewers awoke to a sobering reality: Prohibition had left some deep scars.

The old reality was just a distance memory. For the better part of a half-century before Prohibition, the federal tax on beer was fixed at just $1 per barrel.

But those days were gone forever. Congress had re-legalized beer largely on the basis of its potential as a government revenue builder.

Accordingly, the federal tax was set at $5 per barrel, plus a $1,000 annual license fee for each brewery.

Today, the prevailing tax of $18 per barrel (though lower for production under 60,000 barrels) suggests that beers role as an important federal revenue stream remains fully intact.

On average, more than 40 percent of what consumers pay at retail for beer goes to taxes of some kind – a mix of federal, state and local taxes. In 2012, more than $49 billion in taxes were collected from the production, distribution and sale of beer in the United States.

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