Craft Tax Cuts Big Business a Break

Billionaires got the biggest tax break under the Trump Administration, so it stands to reason that the nation's biggest beer brewers and wineries also scored a huge tax cut in 2017 for the "craft beverages" they produce, like Carlo Rossi jug wine and cans of Miller Lite.

But the cynically named Craft Beverage Modernization and Tax Reform Act – that doled out this government largess to every producer in the alcohol industry – will sunset at the end of 2019, unless Congress manages to pass it again. The bill was reintroduced by its original sponsors earlier this month in an attempt to make its gift to big companies permanent.

You might be able to tell that I'm not impressed by this Congressional giveaway. In 2017, Alcohol Justice reported that of the estimated annual $321 million in lost tax revenue, $50 million went to seven big beer breweries that make more than 2 million barrels annually.

I also despise the fact that sparkling wine producers were completely left out of the bill. Sparkling wine is still taxed at about three times the rate of still wine. Why? When US alcohol tax laws were written in the 1930s, sparkling wine was seen as a luxury for rich people, and therefore somehow extra-naughty. The law has never changed because, unlike with big beer brewers, the companies that make and sell sparkling wine haven't made enough profit to buy enough Congressional representatives.

It would take little to no effort to include sparkling wine in the new CBMTRA, and no effort is exactly what the bill sponsors have given to bubbly.

But despite my disdain, I just can't summon the spirit to write a long rant against the bill. One big reason is that I don't want to side with Alcohol Justice, which wants all alcohol taxes raised so that people will drink less. If you really want to save lives through taxation, tax guns and ammunition.

Also, $321 million is a drop in the bucket for the federal treasury compared to the gift the wealthiest Americans received last year. The Tax Policy Center estimated that the richest 1 percent of Americans could receive about $140 billion (!) per year extra just from the pass-through income provision of Trump's tax cut.

To be fair, the CBMTRA also benefits most small wine, cider, beer and spirits producers through its lower tax rate, because it benefits all producers. They just don't get any extra benefit, like a lower excise tax to help them compete with the big guys.

The bill does contain a poorly written provision that hurts a lot of small wineries that store their wine at custom crush facilities. Some wineries have had to ship their wine back from storage to their own winery before releasing it to be sold, rather than simply shipping it from the storage facility – an unnecessary expense that big wineries with on-site storage don't have to pay. But that was an unintended consequence and it's likely that part will be fixed if the bill is passed again – although because only small wineries are paying the price, it's also possible these wineries will be neglected and screwed again.

Another important part of the CBMTRA is that it changed the dividing line for higher tax rates on wine from 14 percent to 16 percent. I don't like table wines at 15.5 percent alcohol, but I support this change. The original law was written at a time when alcohol rates were naturally lower. In 1935, a 14 percent alcohol wine was shockingly high. A combination of modern viticulture and global warming has changed that: most California wines are over 14 percent alcohol now if harvested at average ripeness.

If the lower tax rate had encouraged wineries to produce lower-alcohol wines through steps in the vineyard, like larger crops and earlier harvest, I'd be all for it. But that isn't what happened. Small wine companies just pick their grapes when they're ripe and pay the higher tax rate, passing it on to consumers. And under the old tax law, large wine companies picked the grapes when they were ripe and then added water (sssh, it's called "washing the fermentation tank") before putting the wine through mechanical alcohol reduction systems to get below 14 percent. The 14 percent line took big companies' wines further from nature: I don't think the government should encourage that.

At the end of the day, even though the CBMTRA is a giveaway to big business, it's far from the worst thing Washington is up to these days. I halfheartedly raise a glass of mass-produced high-alcohol wine to it.