R Street's Kevin Kosar and Jarrett Dieterle have a new explainer out, detailing how the recent tax reform legislation reduces federal excise taxes for different types of alcohol. Although the new tax treatments vary, the impact will likely be significant:
This past December, Congress and President Donald Trump passed the “Tax Cuts and Jobs Act,” which significantly reduced federal taxes across the board. While the legislation’s impact on general corporations and individuals was the subject of substantial analysis, its overhaul of federal alcohol taxes has received much less attention.
However, the reform bill incorporated a version of the Craft Beverage Modernization and Tax Reform Act, which reduced federal excise taxes for all kinds of alcoholic beverages, from beer to distilled spirits and wine. This marks the first decrease in federal wine excise taxes in over 80 years, and the first in distilled spirit excise taxes since the Civil War.
Estimates have predicted that the tax reduction will save the alcohol industry up to $4.2 billion over the next two years. While substantial, this tax savings may also prove transient, as the alcohol tax reductions are slated to expire in two years, on December 31, 2019. It’s also worth keeping in mind that alcohol producers remain subject to state-level excise taxes—which can vary significantly from state to state—as well as state-imposed markups in control states.
This R Sheet summarizes the various tax treatments that alcoholic beverages will receive as a result of the Tax Cuts and Jobs Act.
A link to the full explainer can be found here.