North Coast wineries, breweries, distilleries benefit under GOP tax package
Local wineries, breweries and distilleries are big winners in the GOP tax package, which would slash their tax bills following a concerted lobbying effort by the alcohol beverage industry to reduce the federal excise tax on its products.
The package, which is expected to be voted on by Congress this week, would help small boutique wineries and craft brewers as well as large producers like Jackson Family Wines of Santa Rosa and Lagunitas Brewing Co. of Petaluma.
A winery could receive a maximum tax credit of $451,700 annually under the bill, said Robert P. “Bobby” Koch, president and chief executive officer of the Wine Institute, which represents California wineries.
“I have been helping the wine industry for 25 years. I think this is as big of an achievement for the industry as I have been involved with,” Koch said.
The alcohol-related provisions are not without their critics, who contend that lower taxes will lead to greater abuse and more alcohol-related deaths and violence. The Brookings Institution, a centrist Washington, D.C., think tank, estimated it would result in between 280 and 660 more drunk-driving deaths annually and about 1,550 total alcohol-related deaths a year from all causes.
The provisions were from a bill named the Craft Beverage Modernization and Tax Reform Act, which was co-sponsored by Rep. Mike Thompson, D-St. Helena. Sen. Rob Portman, R-Ohio, was key to the victory as he placed the provision in the Senate version that was ultimately accepted by House conferees and added to the tax package, which was released Friday night.
Thompson, however, opposes the overall tax package despite his support for the ?alcohol-related provisions.
“The final tax bill that Republicans have dropped tonight does exactly what we feared it would: give massive tax breaks to the richest Americans and corporate interests while raising taxes on the middle class, and exploding the already sky-high national debt,” Thompson said in a statement Friday night.
Rep. Jared Huffman, D-San Rafael, said he didn’t sign on as a co-sponsor to the alcohol-beverage legislation because he preferred the benefits go to small producers.
“I just felt it was overbroad,” Huffman said in an interview Friday. “I had a hard time justifying an industry-wide tax cut as a standalone at the same time we are running deficits and increasing our debt.”
Republicans contend the almost $1.5 trillion overall cost of the package over the next 10 years would be paid for by increased economic growth that will pump money back into the U.S. Treasury. Huffman said that growth will not come - as evidenced by a similar tax strategy in Kansas that failed - and that GOP leaders will look to curb such programs as Social Security, Medicare and other safety net programs to make up for lost revenue.
“This is not helping the poor and the working class,” Huffman said. “It’s certainly the potential demise of programs that are lifelines for them.”
The alcohol-related tax provisions will only apply for 2018 and 2019 because tax writers had to juggle demands from a vast array of other industries, from big manufacturers to Wall Street. The cost of the alcohol-related provisions will be $4.2 billion, according to congressional tax scorekeepers.
The two-year time frame will force the industries to lobby again soon for renewal before it expires. Koch contends the bill will spark more hiring, allow companies to devote more resources for marketing and development, and spur innovation.
“They will be able to take risk that they maybe aren’t able to do at this time,” he said of wineries.
The federal excise tax on wine was last raised in 1991 from 17 cents to $1.07 per gallon, with tax credits based on the size of the producer. Small domestic wineries that produce up to 250,000 gallons receive a tax credit of 90 cents per gallon on the first ?100,000 gallons they produce, with that benefit phasing out between 150,000 gallons and ?250,000 gallons. But the benefit doesn’t apply to sparkling wine.
The legislation would provide a new tiered system of tax credits for wineries, offering a $1 credit per gallon for the first 30,000 gallons produced; ?90 cents for the next 100,000 gallons; and then 53.5 cents for up to 750,000 gallons, the equivalent of just over 315,000 cases annually. It also applies to imports.
“The primary objective is to do away with penalizing wineries of a certain size,” Koch said.
The legislation would have another major impact by allowing wines with higher alcohol levels to be taxed at the lowest rate. Under current law, wines with 14 percent alcohol or less are taxed at ?$1.07 per gallon. The tax jumps sharply for wines with higher alcohol levels, up to 21 percent, which are taxed at $1.57 per gallon. The new bill would expand the types of wines that qualify for the lowest tax rate, allowing wines with alcohol levels of up 16 percent to receive the ?$1.07 rate.