Tax Reform Would Make Getting Trashed Cheaper
The Senate's tax proposal would cut federal excise taxes on beer, wine, and spirits.
In the Britschgi household, Thanksgiving means a big family meal with copious libations. If Senate Republicans have their way, the libations will be much cheaper.
Amidst its more controversial changes, the Senate's tax reform bill includes a provision slashing taxes and streamlining regulations for the nation's brewers, vintners, and distillers.
"That would have a huge impact on our business," says Julie Verratti, co-founder of Denizens Brewing Company, a craft brewer in Silver Springs, Maryland. "Any type of alleviation is huge for us."
Currently, the feds put a $7 tax on the first 60,000 barrels a brewery produces. This would be rolled back to $3.50. The bill would also cut the tax rate for a brewer's first six million barrels of beer from $18 to $16.
Lowering the federal excise tax on those first 60,000 barrels would save brewers an estimated $37.5 million per year, according to the Brewers Association.
For small breweries like Denizens—which produces roughly 1,700 barrels a year—that would be substantial and welcome tax relief.
Verratti estimates that halving the federal excise tax would save her business about $6,000 a year, no insignificant sum for a small business. "That's buying kegs, that's buying tanks, that's paying our employees higher wages," she tells Reason.
Distilleries also have stiff tax cuts coming their way.
Right now, makers of the strong stuff pay a federal excise tax of $13.50 on every gallon of distilled spirits. The Senate bill would cut this to $2.70 per gallon for the first 100,000 gallons, and then $13.34 for every subsequent gallon up to 22.1 million gallons.
Winemakers would see some of the rates they pay pruned back as well. Low-alcohol sparkling wines and meads would see their taxes cut by nearly 70 percent, from $3.30 down to $1.07.
The bill also includes some welcome regulatory changes, such as simplified bookkeeping requirement and easier tax-free transportation of booze between breweries and distilleries, a change that would make collaboration on new brews and batches easier.
These changes were initially submitted by Sens. Ron Wyden (D-Ore.) and Roy Blunt (R-Mo.) as a stand-alone alcohol reform bill back in January. Proving that nothing brings people together like a stiff drink, their Craft Modernization and Tax Reform Act had attracted 46 co-sponsors by the summer recess. A companion bill in the House chalked up 252 co-sponsors by the same time.
The bill was rolled into the Senate's tax reform legislation earlier this month.
An ideal federal tax code would be one of broad bases and low rates. That would preclude a bizarre web of differing beverage tax rates depending on type, alcohol content, and, in the case of wine, level of carbonization. These do not go away under the Senate tax bill. But as long as libertarian dreams of a flat tax, fair tax, or even no taxes are a far-off fantasy, cheaper booze sounds like a pretty good stopgap measure.