As Congress works to reconcile the House and Senate versions of the proposed tax changes, policy analysts predict one item likely to survive the discussion is a tax cut on beer, wine, and spirits.
The Senate version of the tax bill lowers federal excise taxes on alcoholic beverages to varying degrees, including a 50% drop on smaller craft beer producers, an 80% cut on the first 100,000 gallons of spirits from a single producer, and an estimated average reduction of 16% across the board. The Senate bill is a modified version of the Craft Beverage Modernization and Tax Reform Act of 2017 first introduced in January.
Impact of Alcohol Taxes
Lobbyists for the alcohol industry argue that breweries, wineries, distillers, and alcohol suppliers “are often the cornerstones of their communities.” Lowering the federal excise taxes will make alcohol makers and sellers more profitable and provide an economic boost to the communities where they are based, goes the claim.
But research shows there is a strong correlation between alcohol prices and consumption: in short, when booze is cheaper, people tend to drink more. The idea of cutting taxes on alcohol—which is likely to decrease the consumer cost of alcoholic beverages—has drawn sharp criticism from anti-drunk driving groups and public health officials.
Drunk Driving on the Rise
In 2016, the U.S. saw drunk driving deaths increase for the second year in a row, and there is concern that lowering the price tag of a drink may add to the backwards trend on alcohol-impaired traffic fatalities. An analysis from the Brookings Institution estimates that lowering the federal alcohol tax could cause 280 to 660 more drunk driving deaths annually. Crash-related injuries, as well as deaths and injuries from alcohol misuse and abuse, would also increase, according to the analysis.
Critics also note that not only has Congress not raised federal taxes on alcohol in more than 25 years, the bill would set those taxes at their lowest level since 1950. In 2016 the Congressional Budget Office (CBO) noted, “current excise tax rates on alcohol are far lower than historical levels when adjusted to include the effects of inflation.”
If passed, the tax cut on booze would expire at the end of 2019. But ultimately, critics argue, any economic benefits communities might see from lower alcohol taxes—which are unproven as of yet—would be dwarfed by increased costs associated with drunk driving, alcohol-related crime, traffic and law enforcement, and alcohol misuse.
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