Congress Should Protect American Distilleries, Not Foreign Liquor Interests

Congress should protect American consumers & small business industries – not favor large foreign corporations

WASHINGTON, D.C. (Texas Insider Report) — The special interests of the Hard Liquor Lobby in Washington, D.C. is attempting to take advantage of the complicated U.S. Tax Code to make hard-working Americans pay the taxes of multi-national hard liquor companies. They're lobbying quietly and pushing legislation in both the U.S. House and Senate, hoping to attach one of their bills to an Omnibus Spending Bill in a way that typically goes unnoticed. This is, by Congressional definition, the ultimate "earmark" for hard liquor.

It also would create a zero percent effective tax rate for offshore liquor companies that import certain foreign-produced spirits and products.

This insidious effort – framed in Congressional bills S.1781 and H.R. 4073 – is how the lobby hopes to expand Trade & Tax Policy.

The legislation severely penalizes small and independent Texas Distilleries – like Deep Eddy Vodka, Railean Rum, and Garrison Brothers – as well as 100s of others in Texas and across the nation, and would create a confusing and unfair domestic marketplace that favors foreign distillers over small, domestic businesses.
This isn’t the first time the big multi-national liquor industry has lobbied for special treatment.
  • In 2020 Congress implemented the permanent tax provisions of the Craft Beverage Modernization & Tax Reform Act (CBMTRA), winning a generous tax break for the lobby and its client distillers.
  • They also benefit from major excise tax loopholes, such as the “rum cover-over,” which rebates a substantial portion of the Excise Taxes paid by U.S. Territories,
  • and the “5010-flavor credit," which allows a tax credit for liquor diluted with wine and other flavorings.
The rum cover-over rebates were intended for investments in territory's infrastructure and pension plans, but liquor companies pocketed the money instead.

And while the "5010 flavor credits" were designed to reduce liquor costs – when as much as 47.5% wine or flavoring was added to hard liquor products – the multi-national hard liquor companies charged consumers full price for the product – and tucked away the profits.

Furthermore, the estimated cost to the U.S. Treasury and American taxpayers is in the billions of dollars over 10 years. These bills would create an even bigger hole in our Federal Deficit.

The windfall would flow directly to a small group of large, multi-national, hard liquor companies – which should outrage all Americans, especially business leaders, members of Congress. and small and independent industry.

According to a recent study from the Center for Community & Business Research at the UTSA Institute for Economic Development, Texas distilleries grew from a total of just eight in 2008, to nearly 190 in 2020 – generating:
  • nearly $2 billion in revenues
  • 4,900 jobs, and
  • $335 million in Texas workers’ Salaries & Benefits
And indirect benefits to other Texas industries, including grain wholesalers, machinery, glass container, and trucking businesses, are immeasurable.

Granting a federal handout of this magnitude to foreign multi-national alcohol companies – at the expense of the average hard-working employee and small businesses distillers – only hurts small American businesses such as the those located within Texas, and most importantly, penalizes consumers and taxpayers. 

The proposed legislation represents another huge tax deduction for big liquor companies, and would do nothing but harm American small businesses and consumers.

The Texas Congressional delegation in Washington, D.C., should oppose both bills:
  In today's precarious economic environment and inflationary times, if nothing else, Congress needs to protect American consumers and small business industries - not over-burden them and favor large foreign companies with tax subsidies.