Yes, actual moonshine is illegal. It is called “moonshine” because it is made at night, when it is lees likely the maker will be caught. Other forms of liquor are legal to make in some states, but the laws vary greatly from state to state.
Moonshine is illegal mostly because it comes down to taxes. Enough is brewed and passed around for it to create a problem for the government, aside from the fact that homemade alcohol can be very dangerous.
Moonshine is illegal in all 50 states, and while laws made home beer and wine making legal in 1978, they never included moonshine. It remains illegal because of the taxes lost each year to the government on the alcohol. Where the government can tax wine at 21 cents per bottle and beer at 5 cents per can, there is a $2.14 tax on 80-proof spirits. It is impossible to know for sure how much is sold illegally, but there is agreement that it totals in the millions each year. In addition, moonshine could also be very dangerous to consume as there is no regulation and regular inspection of the manufacturing process. In some states there is a version of moonshine that can be purchased legally.
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