Liquor Taxes Could Go Up 400%, Thanks to Congressional Dysfunction

“We’re all a little dizzy,” said Margie Lehrman, the chief executive of the American Craft Spirits Association, which lobbies on behalf of small distillers. “The congressional leadership seems stuck because of issues much larger than us.”

Industry lobbyists and legislators who support the bill say that at this point the most they can realistically expect is a one-year extension. But such short-term relief would make it hard for distillers to make long-term investments, like hiring staff, increasing production or buying new equipment.

“The hard part for us is the lack of certainty,” said Robert P. Koch, the president of the Wine Institute, which represents the wine industry in Washington. “To have it extended just one year makes it tough to plan.”

The 2017 legislation cut the amount that all distilleries had to pay on the first 100,000 proof gallons from $13.50 to $2.70 (a proof gallon is a gallon of spirit at 50 percent alcohol). Breweries and wineries received similar reductions, though in their cases the cuts were largely reserved for small producers. Such excise taxes are paid on top of normal corporate taxes.

Trade associations representing all three industries said the vast majority of their members used the tax savings to invest in new equipment and jobs. Bob Pease, the president of the Brewers Association, which represents small breweries, said that craft breweries added 15,000 jobs in 2018, the latest year on record, after an average of just 5,000 for the previous three years.

“I’ve got 7,500 main-street members using that money to reinvest in their companies and their communities,” he said.

The sharp reduction in taxes also encouraged hundreds of new businesses to open, including about 2,000 breweries and 400 distilleries in the last two years. Those companies are especially unprepared for a sudden increase in their excise taxes, which, for most distillers, must be paid every other week.

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