The tax bill signed into law by President Donald Trump on December 22 contains a provision that gives beer, spirits, and wine producers a two-year reduction in federal excise taxes worth $4.2 billion. Small brewers will see their tax rate cut in half, from $7 to $3.50 per barrel, while liquor plunges even more, from $13.50 to $2.70 per gallon.
On December 22, President Donald Trump signed into law a tax bill that was particularly generous to the alcohol industry, CNN Money reported.
Under a provision that originally slipped into the Senate version of the bill, beer, spirits and wine producers will get a two-year reduction in federal excise taxes worth $4.2 billion, CNN reported.
Small brewers will see their tax rate cut in half, from $7 to $3.50 per barrel for the first 60,000 barrels. Tax rates for liquor plunge even more, from $13.50 to $2.70 per gallon for the first 100,000 gallons produced or imported, CNN reported.
For Philip McDaniel, who founded a distillery in St. Augustine, Fla., four years ago, that means savings of about $150,000 next year. He said he’ll put the money toward hiring more people and buying more equipment—for as long as the tax break lasts, CNN reported.
“We’re going to try and make and sell as much as we can to take advantage of it,” McDaniel said. “Hopefully they’ll see the growth, and perhaps they will have the wisdom and the heart to extend it another two years.”
Craft producers seem to be starting up on every street corner in American cities of late—the number of small breweries went from 1,460 in 2006 to 5,301 in 2016, according to the Brewers Association. The number of small distillers is up to about 1,300, CNN reported.
Industry advocates say that not all of those craft producers are profitable, considering the level of regulation, high startup costs, and the marketing and distribution hurdles posed by a landscape dominated by booze behemoths like Miller-Coors, Diageo, and AB-Inbev, CNN reported.
“Your first five years are when you’re trying to earn every penny,” said Julie Verratti, who co-founded Denizens Brewing Company in Silver Spring, Md., in 2014 with a business loan backed by her own house. She estimates the tax break will save her $6,000 in 2018. “Every single bit of that goes back into the business,” CNN reported.
Big companies got a break with this bill as well. Their tax rate on the first 6 million barrels of beer produced or imported will go down from $18 to $16 per barrel, which creates a savings of $12 million per year for the largest producers. The largest winemakers will also benefit from a tax credit previously available only to small wineries, CNN reported.
Big liquor producers also benefit from slashing taxes below 100,000 gallons, and the rate will decline a bit for larger quantities too—on top of the corporate tax cut all of them will enjoy as well, CNN reported.
The measure represents a rare truce between small and large beer companies, which originally had backed separate bills. One of the bills would have lowered taxes just for domestic breweries, and the other would have extended relief to producers headquartered overseas as well, CNN reported.
“In order to get meaningful tax relief for the breweries that I represent, it was necessary for small brewers and big brewers to come together,” said Bob Pease, CEO of the Boulder, Colo.-based Brewers Association, which represents small brewers. “Members don’t like to pick winners and losers.”
In combination, they’re a powerful interest group. Alcohol suppliers and distributors spent $22.6 million lobbying on all issues in 2017, according to Opensecrets, and $12.3 million in campaign contributions during the 2016 cycle, CNN reported.
Those contributions flow to both parties, and the industry has support on both sides of the aisle. Senator Ron Wyden, Democrat of Oregon, sponsored the standalone Craft Beverage Modernization and Tax Reform Act, and Ohio Republican Rob Portman attached a two-year version to the Senate tax bill, CNN reported.
This week, alcohol manufacturers all over America can raise a glass. “Little wins for us are great things,” says Robert Cassell, the owner of New Liberty Distillery in Philadelphia. “And this is a big win.”
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