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Breweries, Wineries, and Distillers Seek Extension on Alcohol Excise Tax Relief

  • Craft brewers and others in the alcohol industry call for an extension on excise tax cuts set to expire at the end of the year
  • End of cuts would cause per-barrel excise taxes to double for small producers, and eliminate a lower rate for brewers that produce 60,000 to 2 million barrels a year
  • Restrictions on restaurants, live entertainment venues, and taprooms have cut into alcohol sales in 2020

Businesses in the alcohol industry are pushing for an extension of excise tax cuts beyond the end of the year, saying an increase in these taxes would batter already suffering businesses in the new year.

The excise tax cuts enjoyed broad bipartisan support when they were included in the 2017 Tax Cuts and Jobs Act, largely due to an explosion in craft breweries in the nation. There are 8,743 beer producers in the United States, nearly quintuple the number in 2010, with the industry benefiting from the excise tax cuts as well as relaxed state laws that make it easier to establish a brewery. The alcohol industry supported approximately 5.4 million jobs and generated $562 billion in economic activity in 2018.

Originally lasting for two years, the excise tax cuts were extended through 2020 but are set to expire on Dec. 31. Despite the wide support for the measure, including some proposals to make the tax cuts permanent, it is unclear if Congress will take action on the issue before the end of the year due to economic stimulus negotiations and other matters. Since the excise tax is collected more frequently, it is also more difficult for Congress to let the tax cuts expire and later renew them retroactively.

The per-barrel tax on the first 60,000 barrels would double from $3.50 to $7 if the excise tax cuts expire. The tax would increase to $18 a barrel for breweries that produce more beer; currently, smaller producers pay $16 per barrel on production greater than 60,000 barrels but less than 2 million barrels a year.

The push to extend the excise tax cuts is being supported by breweries, wineries, and distilleries, as well as trade groups representing restaurants and barley growers. Alcohol sales fell sharply during the pandemic due to shutdowns and restrictions on restaurants and live entertainment venues. The impact has been greatest on smaller breweries and vineyards, which collect a larger share of their revenue from on-premises taprooms and tasting rooms.

Save the Beer Economy, a coalition formed to press for action on the excise tax cuts, says retail beer sales are forecast to drop by $22 billion in 2020. In its breakdown of the beer industry by state, it says Connecticut supports 21,347 beer jobs and generates over $3 billion in economic activity, and that the state has lost 5,847 beer jobs due to the pandemic.

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