Budget Deficits and Beer Excise Taxes in Alabama

Entering fiscal year 2005, Alabama faces a revenue shortfall that may reach up to $510 million.1 In response, the Governor has proposed cutting the Medicaid program, reducing the benefits of state workers, and instituting broad cuts in every state agency. Since Alabama must end the fiscal year with a balanced budget, it must cut services, increase revenues, or both. Raising beer excise taxes, last done in 1969, provides a rational, politically popular means of increasing state revenues. Besides providing revenue, raising beer taxes may help reduce rates of alcohol-related problems, particularly among underage drinkers.2 Public opinion polls show that a strong majority support alcohol tax increases, especially when the money is earmarked for alcohol prevention and treatment programs.3 This report presents several feasible choices for raising Alabama’s beer excise taxes to lower the state’s budget deficit and to provide much-needed funding for state prevention programs and/or other public services. [In the interest of simplicity, this analysis considers only increases to the state beer excise tax, and not the separate wine excise tax. While CSPI also favors an increase in the wine excise tax, it is not currently being discussed by Alabama’s elected officials.