Let’s be honest: the recent overhaul of the tax code was not a bipartisan endeavor. The new law was written by Republicans, amended by Republicans, and enacted into law by Republicans. But there’s one part of the new law that serves as a notable exception, and should invite cheers from Americans across the ideological spectrum.
Late in the legislative process, a provision was inserted in the bill to reduce excise taxes on alcohol producers. It was very closely modeled after the Craft Beverage Modernization and Tax Reform Act, a bill authored by a prominent Democrat, Sen. Ron Wyden of Oregon. Wyden’s stand-alone legislation has 54 cosponsors in the Senate, 29 of whom are Democrats. The House version has 303 co-sponsors, 133 of whom are Democrats. The bill also enjoyed broad support from across the alcohol industry — brewers, vintners, and distillers of all sizes backed the legislation.
By Washington standards, that’s about as non-controversial a bill as you can possibly get.
Unfortunately, the provision has fallen prey to the same hyper-partisanship that has made the rest of the tax reform law so polarizing. According to one preposterous study from a left-leaning think tank, the provision will kill 3,100 Americans — a figure reached by assuming the tax cut would be fully passed along to consumers in the form of lower prices, despite the fact that virtually no one believes that will actually happen.
A misleading article in the Washington Post suggests the provision will only benefit large alcohol companies and not small ones. While the alcohol “experts” cited in this article seem to believe small companies are getting the short shrift, this opinion isn’t shared by the actual small businesses that are affected by the law. Indeed, some of this provision's most passionate and outspoken advocates are small companies that are trying to expand production, hire new workers, and create innovative and high-quality beverages.
The new tax structure will benefit all alcohol producers, with the largest rate reductions going to small breweries, winemakers, and distillers. For beer, the smallest brewers were paying an excise tax rate of $7 per barrel. This has now been halved to $3.50 for all production up to 60,000 barrels.
To put that in context, the latest data from the Treasury Department show 5,096 breweries currently in operation. Of those, 98 percent produce fewer than 60,000 barrels per year and therefore will see their excise tax bill cut in half. After the 60,000 barrel threshold, the excise tax was cut from $18 per barrel to $16. Once a brewery hits 6 million barrels of production, the excise tax increases to the same $18 rate that existed before the new law.
For small distillers, the tax bill might be an even bigger victory. Previously, all distillers, regardless of size, were taxed at the same rate of $13.50 per proof gallon. The new tax law cut that rate to $2.70 for the first 100,000 proof gallons of production. According to the American Craft Spirits Association, 92 percent of distilleries produce fewer than 100,000 proof gallons annually, meaning these small businesses would get an excise tax cut of 80 percent. Certainly mid-sized and larger distillers will also see substantial benefits, although the tax rate for production above 100,000 proof gallons of spirits was left unchanged.
Again, anti-alcohol “experts” claim that these savings are meaningless because large alcohol producers will get more in terms of total tax savings. But there are no shortage of examples that prove these individuals are mistaken.
For instance, the Millennial Brewing Company in Fort Myers, Fla., which produced about 1,000 barrels last year, will add new fermenting equipment to increase production capacity thanks to the new tax law. The owner of Whiskey Acres Distilling Co. in DeKalb, Ill., said he plans to hire new workers, build a new visitor center, and expand output thanks to the lower excise tax rate, which he believes will level the playing field between craft distilleries and large companies.
Ed Parker, a co-founder of the Brew Rebellion microbrewery in San Bernardino, Calif., put it best: “These tax breaks are a big deal for small businesses like ours,” Parker says. “Don’t believe those who tell you different.”
Brandon Arnold (@BrandonNTU) is a contributor to the Washington Examiner's Beltway Confidential blog. He is the executive vice president at the National Taxpayers Union.
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