The alcohol industry is pressing Congress to make permanent the excise tax relief it received under the Republican tax law.
The measure President TrumpDonald TrumpMcCabe wins back full FBI pension after being fired under Trump Biden's Supreme Court reform study panel notes 'considerable' risks to court expansion Bennie Thompson not ruling out subpoenaing Trump MORE signed in December reduces excise tax burdens on distillers, brewers and vintners for two years, and industry groups are hoping that these changes can last for a longer period of time. Industry groups argue that the tax relief is particularly beneficial to smaller producers and is helping businesses make new investments and hire more workers.
It’s unclear what the vehicle would be for extending the cuts, but groups are optimistic that an extension will happen because there has been bipartisan support for lowering the excise tax burdens.
“As people hear more and more about how this bill is helping businesses in their communities, I think support will continue to grow,” said Charles Jefferson, vice president of federal relations and international public policy at the Wine Institute.
The new tax law reduces excise tax burdens for alcohol producers of all types and sizes.
For beer, the excise tax rate has been cut from $18 per barrel to $16 per barrel on the first 6 million barrels brewed or imported in a year. For small domestic brewers, taxes on the first 60,000 barrels have been cut from $7 per barrel to $3.50 per barrel.
For distilled spirits, an across-the-board rate of $13.50 per proof gallon has been replaced with a tiered system. The tax rate is cut to $2.70 per proof gallon for the first 100,000 proof gallons sold or imported in a year, and is cut to $13.34 for proof gallons on the next 22.13 million proof gallons.
For wine, the tax law replaces a tax credit that was only available to small producers with credits available to all wineries. The credits are larger for wineries’ initial gallons each year.
The law also allows sparkling wine producers and importers to be eligible for the credits, and it increases the number of products that would be eligible for the lowest excise tax rate for wine.
Providing tax relief to alcohol producers has been a goal of a bipartisan group of lawmakers for a number of years. Stand-alone legislation called the Craft Beverage Modernization and Tax Reform Act has widespread support, with majorities in both the House and Senate signing on as co-sponsors.
When the legislation was incorporated into Republicans’ larger tax-cut bill, the excise tax relief was only included for 2018 and 2019, likely for budgetary reasons. The Joint Committee on Taxation estimated that the two-year excise tax relief would lower federal revenue by $4.2 billion before 2020.
Alcohol industry groups say that their members have already started to benefit from the tax cuts and are using the savings to reinvest in their businesses. Brewers, distillers and vintners are touting their new investments as they urge Congress to extend the tax relief.
Members of the Distilled Spirits Council and the American Craft Spirits Association are meeting with lawmakers this week to make the case for permanent excise tax cuts.
“Most all the benefit is going right back into the business,” said Mark Gorman, senior vice president of government relations for the Distilled Spirits Council.
Margie Lehrman, executive director at the American Craft Spirits Association, said that many craft distillers might have to close without the excise tax reductions, since their startup costs can be quite large.
It’s important to make the cuts permanent “to keep this particular segment of the industry healthy,” she said.
Beer and wine groups are also pushing for the tax changes to be extended.
“You’re seeing brewers around the country who are excited about this excise tax break and right now are thinking about how they can use it to improve their businesses,” said Jim McGreevy, president and CEO of the Beer Institute.
He added that extending the excise taxes is important in light of Trump’s aluminum tariff, which he said would significantly hurt brewers.
In addition to making the tax cuts permanent, wine groups are also pushing for a fix to the law that would stipulate that the new tax credits for wine can be used by storage facilities known as bonded wine cellars.
An extension of the excise tax cuts is opposed by some groups seeking to curb alcohol abuse and drunk driving. They argue that much of the benefits will go to large distillers and brewers and that producers will use their tax savings to lower prices on their products, which could lead to increased alcohol consumption.
“In the broadest sense, one of the easiest ways to lower consumption without restricting personal freedom is to raise taxes,” said Carson Benowitz-Fredericks, research manager at Alcohol Justice.
A National Academies of Sciences, Engineering and Medicine report released in January argued in favor of increasing alcohol taxes to help reduce binge drinking and deaths from alcohol-related vehicle crashes.
J.T. Griffin, chief government affairs officer for Mothers Against Drunk Driving, said that lowering the excise taxes is “not good for public health. It’s not good for public safety.”
Alcohol industry groups, however, said the tax cuts are unlikely to have a major impact on prices.
“Our members are going to be reinvesting the money that they’re saving,” said Katie Marisic, federal affairs manager at the Brewers Association. “We think that they’ll hire new employees and increase their economic development.”
Lawmakers have yet to decide if they’ll seek to extend the reductions in excise tax burdens. Industry groups suggested that an extension could be included in a “tax extenders” bill that renews expiring tax breaks, or in an omnibus spending bill.
Democrats, who all opposed the GOP tax law that included the alcohol tax cuts, have been skeptical of making temporary provisions in the law permanent.
However, industry groups are positive about their chances, given that many Democrats backed a stand-alone version of the excise tax relief.
The Senate’s version of the stand-alone bill was introduced by Sen. Ron WydenRonald (Ron) Lee WydenDemocrats' reconciliation bill breaks Biden's middle class tax pledge Missouri education department calls journalist 'hacker' for flagging security flaws on state website Democrats weigh changes to drug pricing measure to win over moderates MORE (Ore.), the top Democrat on the tax-writing Senate Finance Committee. A spokesperson for Democrats on the panel said that Wyden continues to push for passage of the bill.