High Noon Has Lower Alcohol Content Than White Claw, Yet Is Taxed More Heavily And Harder To Purchase In Much Of U.S. 

While stocking up this summer for cook outs, graduation parties, and family vacations, Americans can expect a logistical wrench to be thrown into their plans depending on the state they are in and their beverage of choice. Americans who prefer High Noon over White Claw, for example, will pay a higher excise tax on their purchase and, depending on the state, might have to make an extra trip to a government-run liquor store to procure their preferred adult beverage. This problem stems from the fact that the federal government and many states determine excise tax rates not based on alcohol content, but on the method of production.  

Alcohol is one of the most punitively taxed goods in the United States. On top of federal excise taxes, each state taxes beer, wine, and spirits at different rates. As in many other areas, federal and state laws have not kept up with market innovation and evolution of consumer tastes. This is now on display with the tax and regulatory disparity that exists in many states between adult seltzers, ready-to-drink cocktails (RTDs) like canned Jack & Coke, and competing products with similar alcohol content.  

In many states and at the federal level it is the method of production, not alcohol content, that determines how canned seltzers and RTDs are regulated and taxed. The federal government and states tax alcoholic seltzers such as White Claw and Truly at the same rate as beer because the alcohol is derived through fermentation. Competing RTDs like High Noon, whose alcohol is derived from the addition of a small amount of distilled spirits, are taxed by the federal government and many states at the spirits excise tax rate. That is the case even though such spirit-based RTDs have a lower alcohol content than the more lightly taxed White Claw.   

Among the most recent states to rectify the tax and market access disparity between spirits-based RTDs and competing products was Vermont, where lawmakers passed legislation in 2022 creating a new tax category for RTDs with rate set equal to that of beer and wine. 31 states now permit spirits-based RTDs to be sold in grocery stores alongside beer and wine. Additionally, 29 states allow RTDs to be sold in convenience stores. The most recent state to address this disparity in market access is Pennsylvania.  

The most recent state to rectify this disparity is Pennsylvania, where there is divided control of government. On July 17, Governor Josh Shapiro (D-Pa.) signed SB 688, enacting a reform that allows spirits-based RTDs like High Noon to be sold alongside competing beverages that are already in grocery stores, such as White Claw. With enactment of SB 688, which was introduced by Senator Mike Regan (R), we have an example of a bipartisan reform that will increase convenience for Pennsylvanians.  

Expect similar proposals to rectify these tax and market access disparities in the adult beverage market to be advanced in 2025, especially since this is still problem that needs to addressed in states like Texas, Tennessee, North Carolina, and South Carolina, where legislative leadership considers themselves to be more pro-free enterprise than their counterparts in Harrisburg, Montpelier, and other state capitals where such nonsensical disparities have already been addressed.