The Beer Tax and the Sales Tax

Report Outline
The Defocot, New Economics and New Taxes
The Federal Budget and the Need of New Revenue
The Movement for a Federal Tax on Beer
The Sales Tax in the 72nd Congress
Sales Tax Legislation in the States in 1932
Special Focus

The Defocot, New Economics and New Taxes

Volstead Act Modification and Possible Hoover Veto

When Congress convenes on December 5, 1932, the current deficit in federal finances will approximate three-quarters of a billion dollars, with the prospect of considerably exceeding $1,000,000,000 by the end of the fiscal year on June 30, 1933, unless new taxes are promptly imposed. There is, in any event, scant possibility that the budget can be balanced for the present fiscal year. A White House statement of November 19, 1932, announced that reductions in appropriations of about $700,000,000 would be recommended in the budget for the fiscal year 1934, which will be presented to Congress at the opening of the next session. While it was inferred that imposition of new taxes might thus be averted, strong doubt remains as to whether such action can be avoided, even if Congress should accept all of the economy measures to be advocated by the administration.

Failure of the new and increased taxes imposed by Congress at its last session and of the economy steps then taken to achieve the objective of a balanced budget has aroused widespread discussion of possible new sources of federal revenue. Substitution of a general manufacturers' sales tax for most of the special excise or “nuisance” taxes now in effect and modification of the Volstead act to permit the sale and taxing of beer are now regarded as virtually the only means of producing whatever additional revenue may be necessary. Whether one or both of these measures will be needed to balance the budget now seems to depend on the extent to which Congress will be willing to go in cutting federal expenditures.

Balancing the Budget by Taxes on Beer or Sales

The movement to modify the federal prohibition enforcement act and replenish government revenues with the proceeds of a beer tax, pushed without success at the last session of Congress, was given strong impetus by the sweeping Democratic victories at the polls on November 8. The 1932 Democratic platform pledged members of the party to immediate modification of the Volstead act. In the present Congress the Democrats already control the House and are in a position to control the Senate with the aid of a few Progressive votes. Various Democratic leaders have been joined by wet Republican members of Congress in asserting their intention to press for action on beer legislation at the short session. The success of such a move is threatened, however, by reports that President Hoover would veto a beer bill if it were presented for his signature. Although enough votes might, be mustered in the House to override a veto, the requisite number is believed to be lacking in the Senate.