Civic Register
| 11.16.17

Senate GOP Tax Bill Would Lower Alcohol Tax

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What’s the story?

The latest version of the Senate GOP tax plan includes a major excise tax reduction for producers of beer, wine, and liquor.

The amendment is a "modest, two-year version" of the Craft Beverage Modernization and Tax Reform Act.

"It's terrific recognition that distilled spirits have been overtaxed for a long time and this would the first distilled spirits tax reduction since the Civil War," said Mark Gorman, senior vice president for the Distilled Spirits Council.

The Congressional Budget Office (CBO), however, noted in 2016 that "current excise tax rates on alcohol are far lower than historical levels when adjusted to include the effects of inflation."

The tax cuts would expire after two years, on December 31, 2019, unless Congress extends them.

According to the Joint Committee on Taxation, the liquor changes would cost the Treasury $4.2 billion.

Why does it matter?

Here are a few ways the Senate proposal would cut alcohol taxes:

  • Beer, which is currently taxed at $18 per barrel, would now be taxed at $16 per barrel for the first two million barrels produced or imported.

  • Small domestic brewers are currently taxed $7 per barrel for the first 60,000 barrels. Under the new plan, the rate would be cut in half to $3.50.

  • Currently, wines containing up to 14% alcohol are taxed at $1.07 per gallon and wines with 14% to 21% alcohol are taxed at $1.57. The new proposal would apply the $1.07 rate to wines with up to 16% alcohol.

  • Distilled spirits would be taxed on a tiered system. Currently, distilled spirits are taxed at $13.50 per proof gallon. The new proposal lowers that to $2.70 per gallon for the first 100,000 gallons; $13.34 per gallon for anything between 100,000 gallons and 22,130,000 gallons; $13.50 for anything larger than that.

As CNN Money explained, "It's unlikely the tax savings will be passed along to the consumer in the form of a price reduction on beer, wine or spirits. Business owners are looking to reinvest the savings."

Sen. Rob Portman (R-OH) proposed the amendment, saying the changes would produce jobs.

"Ohio is No. 4 right now in craft beer production and we like that," Portman said. "This legislation is only going to promote the expansion and the jobs that come with these entrepreneurial small businesses."

"We're not popping corks yet because there's a lot of stages in the legislative process," said Frank Coleman, senior vice president for the Distilled Spirits Council.

What do you think?

Will lowering the alcohol tax promote the expansion of jobs? Or should the Senate GOP bill focus on alcohol consumers rather than producers? Any other industries you want to see included in the tax overhaul plan? Hit Take Action, tell your reps, then share your thoughts below.

— Josh Herman

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(Photo Credit: Bill Oxford / iStockphoto)