Alcohol industry ramps up pressure on Congress for tax relief
Business groups are rallying to push Congress to extend alcohol excise tax relief provisions that expire at the end of an already challenging year for the industry.
Trade organizations representing brewers, winemakers and distillers are designating Tuesday as a day of action for businesses to urge lawmakers to pass an extension. Additionally, groups from across the beer supply chain are launching a new coalition this week called Save the Beer Economy.
There is widespread bipartisan support for extending the excise tax reductions, but it remains to be seen if Congress takes up any legislation on the matter before the end of the year. Stakeholders argue that extending the tax relief is pressing, particularly given how the coronavirus pandemic has impacted small alcohol producers.
“There’s quite a bit of advocacy going on from brewers, from distillers, from vintners around the country, all working together to show the value of this,” said Jim McGreevy, president and CEO of the Beer Institute.
President Trump’s 2017 tax law included a provision to reduce excise-tax burdens for winemakers, brewers and distillers for 2018 and 2019. The tax breaks were extended into 2020 as part of a government funding package enacted last year.
While much of that law only received GOP support, the provision on alcohol excise taxes has the backing of lawmakers in both parties and was based on legislation to permanently reduce the taxes that had been in the works for many years with widespread congressional support.
With the expiration of the tax reductions approaching, a new push for an extension has brought together the alcohol industry, hospitality sector and agriculture groups.
The new coalition counts the Beer Institute, National Restaurant Association and National Barley Growers Association as partners. Anheuser-Busch is providing financial resources toward the effort, according to a spokesperson for the coalition.
Aaron Frazier, director of health care and tax policy at the National Restaurant Association, said “alcohol sales are critical to save the local restaurant, pub or tavern.”
The coalition has circulated to congressional Democratic aides a paper from the Progressive Policy Institute (PPI), a center-left think tank, that argues it makes sense for Democrats to back an extension of the excise tax reductions.
“This reduction in excise taxes is good on both economic and equity grounds, and so it should be extended and made permanent,” said Michael Mandel, chief economic strategist at PPI and the author of the paper.
Mandel said an increase in excise taxes would be regressive and hit “blue wall” states such as Michigan, Minnesota, Pennsylvania and Wisconsin that saw significant growth in brewery jobs before the pandemic.
Alcohol industry groups argue the pandemic has heightened the need to extend the tax reductions. They said smaller breweries, wineries and distilleries have been particularly hard hit during the pandemic because they are more dependent on revenue from visits to their tasting rooms and sales at restaurants.
They’re expected to be hit even harder this winter as COVID-19 cases surge across the country and more states and municipalities impose restrictions on bars and indoor dining.
Jeff Quint, founder of Cedar Ridge Distillery in Iowa, said his business would “have to make some serious modifications to our plans next year” if the reduced excise taxes aren’t extended.
Charles Jefferson, vice president of federal and international public policy at the Wine Institute, said wineries have not only been impacted by the pandemic but also by a particularly bad wildfire season in the western part of the country.
“The uncertainty of the craft provisions is hanging over all wineries as they try to recover,” he said.
Lawmakers on both sides of the aisle are supportive of extending the tax reductions. A bill to make the excise tax reductions permanent, called the Craft Beverage Modernization and Tax Reform Act, is sponsored by about 350 House members and about three quarters of all senators.
But there still remain obstacles to any extension, short-term or long-term, being enacted this year.
It’s unclear how much Congress will accomplish in the lame-duck session, given the start of a new administration next year. And with a tight legislative calendar, passing a standalone measure in both chambers could prove challenging.
At least one major bill is expected to make its way through Congress before January: Congress needs to pass legislation by Dec. 11 to avoid a government shutdown, but there’s no guarantee any tax measures will be attached to appropriations legislation.
Many lawmakers are also interested in passing another coronavirus relief bill this year, even though Democrats and Republicans have struggled to reach an agreement on such a package for months. Groups representing a wide spectrum of businesses are hoping for industry-specific provisions to help them weather the rest of the COVID-19 recession.
When the excise tax reductions were extended last year, they were among a number of temporary provisions known as “extenders” that were given new expiration dates. There’s less urgency for Congress to act broadly on tax extenders this year, because many of the provisions won’t need to be extended until next year to guarantee they can be claimed on 2021 tax returns.
However, the expiration of the alcohol excise tax reductions would start to be felt by businesses early next year, since the taxes are paid periodically during the year.
“During this lame-duck, there’s a lot of things for Congress to consider, including an economic stimulus bill, and it is imperative that this legislation gets passed by year end or we’ll have many, many craft distillers devastated as a result,” said Chris Swonger, president and CEO of the Distilled Spirits Council of the United States.
Senate Finance Committee ranking member Ron Wyden (D-Ore.), the lead sponsor of the Senate bill to make the excise tax relief permanent, said extending the tax breaks is a priority of his.
“Brewers, vintners, and distillers in Oregon need certainty to grow, and this is especially true given the current state of the economy,” he said. “Small businesses nationwide have been walloped and can’t take another hit. I’m pushing hard to extend their tax relief in the end-of-year package.”