While tariffs have been on everyone’s mind, it’s actually a homegrown tax that could have (and still could) seriously damage the spirits industry.
As reported by the New York Times, a 2017 cut in federal excise taxes on alcoholic beverages (as part of the Craft Beverage Modernization and Tax Reform Act) was scheduled to run out at the end of the year. The legislation cut the amount of tax distilleries had to pay on the first 100,000 proof gallons.
As the Times noted, this tax reduction (coupled with increased consumer demand) was a certainly a factor in the opening of 2,000 new breweries and 400 new distilleries since the legislation went into effect.
But the tax cut would have expired on December 31st, and the 400 percent tax increase could have led to probable layoffs and closures.
Fortunately, as of Tuesday, there’s been a reprieve of a year.
The tax cut enjoys rare bipartisan support and a permanent extension passed the House Ways and Means Committee this past summer. However, until the cut is permanent, many distilleries are hesitant to make long-term investments.
“One year is awesome for one year, but then what?” as Jaime Windon, the chief executive and co-founder of Lyon Distilling, told the Times. “I’ll still probably cut back next year. I can’t go forward without that confidence.”
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