The Tax Cuts and Jobs Act, passed and signed into law at the tail end of 2017, lowered the tax burden for millions of individuals and businesses. But, more rarely discussed is the positive impact the legislation is specifically having on alcohol producers and associated enterprises, including restaurants, bars, and other hospitality establishments.
All three prongs of the alcohol triad — beer, wine, and spirits — have directly benefited.
As a result of the legislation, excise taxes fell by 50 percent for smaller beer producers and dropped from $18 a barrel to $16 a barrel for larger ones. For wine, the lowest tax level was expanded to include more products and previous restrictions around the excise tax credit were lifted, allowing all wineries to take advantage of a financial perk that had previously been enjoyed by only the few.
A similar story played out for distilled spirits. The bill created a graduated excise tax structure that lowered the tax burden for all distillers, notably reducing the tax level by 80 percent for those producing less than 100,000 proof gallons a year.
In all, the changes are estimated to save the industry $4.2 billion annually.
Unsurprisingly, the resulting impact of these tax reductions on the broader economy is far-reaching, especially considering the major role these industries already play in the U.S. economy.
The domestic beer industry, for example, creates $350 billion in economic activity annually, which contributes to over two million jobs. U.S. distillers support 1.4 million jobs and are responsible for nearly $78 billion in retail sales. And winemakers operate more than 8,500 wineries nationwide, employing many Americans in the process.
Anecdotal examples also provide powerful illustrations of how the tax cuts have specifically benefited industry businesses.
Jordan Winery, based in California, distributed $1,000 bonuses to all 85 employees. Wood Boar Brewery, based in New York, expanded production and hired new workers. And Ole Smoky Distillery, based in Tennessee, used the financial savings to disperse employee bonuses, purchase new equipment, open up a new distillery, and hire more team members. All thanks to the Tax Cuts and Jobs Act.
But the tax cut induced benefits don’t stop with businesses and employees who are directly connected to alcohol production. When alcohol producers experience tax savings, there’s a wider ripple effect throughout the hospitality industry, a factor that has likely contributed to the strong economic performance of the sector in recent months.
You see, although lower alcohol excise taxes are first applied at the producer level, the financial benefits inevitably roll down the supply chain, lowering alcohol costs for distributors, retailers, and consumers. In practice, not only does this mean enjoying a glass of your favorite beer, wine, or spirit is less expensive, but the restaurants and bars that sell it will experience more comfortable profit margins.
It’s clear the tax cuts are working, strengthening businesses and improving the lives of countless employees, but there are dark clouds on the horizon.
The provisions included in the Tax Cuts and Jobs Act that specifically apply to alcohol are set to expire at the end of 2019, a move that will not only harm the alcohol industry and affiliated employees, but walk back broader economic progress.
Luckily, legislation was recently introduced in the U.S. Senate to extend the measures indefinitely. Congress should consider the bill immediately in order to secure strong industry growth for years to come and ease financial worry for distillers, brewers, and winemakers across the country.
The Tax Cuts and Jobs Act has brought unprecedented financial relief to America’s alcohol producers, associated businesses, and those who enjoy the products responsibly. Extending these measures is something everyone should be able to support.
It’s time to raise a glass to extending alcohol excise tax cuts.
Jackson Shedelbower is the communications director of the American Beverage Institute.