Doom of the Distilleries? If congress doesn’t pass legislation before the New Year, alcohol taxes will rise 500% for craft distillers
“This may be the final blow for many small craft distilleries"
As with most businesses, the pandemic hit Colorado’s craft distilleries hard. Many of these small businesses rely on income from their tasting rooms to supplement their production and distribution costs — tasting rooms which have been either closed or at half capacity since last March. A survey on the impacts of COVID-19 on distilleries found that two-thirds of them didn’t believe they could sustain operations for another six months under current restrictions…
And now, to compound that stress, if a particular piece of legislation, known as the Craft Beverage Modernization and Reform (CBMR) Act isn’t passed by the end of this year — which is only thirteen days away as of this writing — the federal excise tax (FET) on their alcoholic products will skyrocket by a staggering 500%.
It would be the coup degras for many of our local distilleries, who are already struggling to stand on one foot.
“2020 has been such a stressful year for craft distillers with the devasting impact of the pandemic, the retaliatory tariffs and now a looming massive federal tax hike,” wrote Chris Swonger, President & CEO of the Distilled Spirits Council of the United States. “The countdown is on. If we don’t get the Craft Beverage Modernization and Tax Reform Act (CBMTRA) passed by the end of the year, I fear this may be the final blow for many small craft distilleries.”
The CMBA was passed as part of the 2017 Tax Cuts and Jobs Act, and it was the first reduction of the Federal Excise Tax on booze since the civil war. It reduced the FET on a producer’s first 100,000 proof gallons of alcohol from $13.50 to $2.70. That was a blessing to many craft distillers, who were no longer forced to exist on a razor’s margin of profit. It’s also largfely why there’s been so much growth in the craft distillery scene in the last two years.
Originally that reduction of the FET was supposed to be permanent. But, thanks to political compromises and changes on the floor of Congress, that was capped at just two years. Meaning that, when the day finally came, if the CBMR wasn’t renewed, then distillers across the nation would be slapped with a truly devastating tax hike.
Well, that day has come — and it couldn’t have been at a worse time.
“We are waiting with growing dread to learn if our excise taxes will soon quintuple overnight on January 1.” Wrote Tom Potter, the president of New York Distilling Company in Brooklyn. “Expiration of the current tax rates would be flat devastating to us, and would come at the worst possible time. The increase in taxes would equate to one-third of our entire payroll. It’s hard to understand how a proposal with such overwhelming bipartisan support could be left hanging this way. We’re begging Congress to renew it.”
However, at present, things aren’t looking very hopeful. Congress is scheduled to go on Christmas break for “State Work” Monday the 21st. Which, if they stick to that schedule, could mean that this bill is left hanging, and that it doesn’t get renewed.
That would be sucker punch, not only to craft distilleries across the nation, not only to their employees who very likely will be out of work, but also to America at large. This country has never needed good whiskey and spirits more than we do now — we cannot afford to lose that vital resource during such times of strife.
Call your Congressional representatives and demand action on the Craft Beverage Modernization and Reform Act. Or go onto the CBMTRA website and write a message — they’ll forward it directly to the people who need to see it.
Help save our distilleries!