The champagne bottles popped on New Year's Eve 2020 will likely be the best deals people can find in a long time. Tax cuts on beer, wine, and spirits producers are set to expire on Jan. 1, 2021, unless Congress acts swiftly to ensure that people everywhere can drink and be merry into 2021 and beyond.
Excise tax rates on alcohol producers were cut as part of the 2017 Tax Cuts and Jobs Act, but those are set to expire at the end of the year. These lower tax rates were enacted to free up resources for brewers, vintners, and distillers to spend on new equipment and new workers. This strategy worked.
According to the Brewers’ Association, of the 160,000 jobs that are directly supported by small, craft breweries, 25,000 were created in 2018 and 2019. Similar job growth and business expansion have occurred across the industry as new small breweries, wineries, and distilleries have popped up throughout the United States, generating new employment opportunities and economic activity.
But COVID-19 has changed the equation. The excise tax relief has been a lifeline for these struggling small businesses. Allowing it to expire will not just add a few dollars to the cost of alcoholic beverages. It will cause job losses that extend far beyond the small breweries, vineyards, and distilleries that might soon shut their doors for good.
Our economy is interconnected, and disruptions that seem isolated have ripple effects. Higher costs will hurt not only the producers of adult beverages but will also negatively impact millions of other workers supported by the industry. These jobs include marketing and design companies that support the brands, truckers who drive for beverage distributors, workers who stock the shelves at retail stores, and servers at restaurants and taverns.
These are just some of the millions of jobs supported by the beer, wine, and spirits industry. As is the case in other sectors of our economy, these jobs are in danger due to the pandemic.
According to research from the Beer Institute, 651,000 jobs supported by the beer industry will likely be lost this year. That number could increase as the weather turns frigid across the country, and many of these alcohol producers will have to close or scale back the outdoor tasting rooms that helped keep their businesses afloat.
Businesses, and especially small businesses, are facing unprecedented times. Surviving will get more challenging as we’ve seen states and municipalities impose stricter lockdown measures in response to the increase in coronavirus cases.
Congress cannot save all of these businesses, but it can help many. It can start by passing a broad COVID-19 relief bill that expands policies such as the Paycheck Protection Program and Employee Retention Tax Credit. These will be critical to helping bridge the gap until vaccines are widely deployed.
On top of that, it should immediately extend the expiring excise tax reductions that provide the largest benefits to the smallest producers of alcoholic beverages. This is a bipartisan issue with broad support in Congress. Legislation to make the excise tax relief permanent is sponsored by 351 representatives in the House and 77 senators.
Yet, in today’s politically toxic environment, Congress is struggling to get much of anything done. That’s unfortunate. If Congress doesn’t act quickly, the tax relief will expire just as the ball drops at midnight on New Year’s Eve. While it won’t stop most of us from enjoying an adult beverage that night, it would be a disappointing way to end a very trying year.
Brandon Arnold is the executive vice president of the National Taxpayers Union.
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