17. Taxes and Prohibition
Throughout the nineteenth century and well into the twentieth, one of the best arguments deployed by brewers and distillers was the importance of the taxes they paid. Taxes from alcohol manufacturers were a huge chunk of the US Government’s budget, amounting at times to 40% or more of the total. In 1910, 71% of the federal government’s internal revenue, and 30% of its overall revenue, came from alcohol taxes.
As the tide of prohibition sentiment kept rising, alcohol manufacturers found themselves in the incongruous position of being an industry that welcomed – and sometimes even invited – the government to tax it more. The more dependent Uncle Sam was on the taxes collected from brewers and distillers, the less likely it was to enact prohibition and kill off an industry whose taxes kept the federal government afloat. The bottom fell out of that argument when the Sixteenth Amendment was ratified.
