Distillers Poured Resources Into Fighting COVID-19, Now They Need Congress' Help
By Chris Swonger
The coronavirus pandemic has produced thousands of everyday heroes, from doctors and nurses to grocery store workers and delivery drivers.
Distillers have also emerged as heroes -- and not only because they crafted your whiskey.
Across the country, distillers of all sizes have revamped their facilities to produce desperately needed hand sanitizer.
Huber's Starlight distillery in Indiana, for example, is providing hundreds of gallons of hand sanitizer to first responders, healthcare agencies, and others in the community. All told, more than 700 distillers have stepped up to help stop the spread COVID-19.
These spirits-makers have poured their energy into helping others. But now, they could use some help themselves. COVID-19 has forced restaurants, bars, and distillery tasting rooms across the country to close, significantly impacting revenue. And making hand sanitizer, which many distilleries are donating to charity or selling at cost, isn't a long-term solution.
The spirits industry experienced a short-term boost as Americans stocked up on alcohol while preparing to shelter-in-place.
But this demand is expected to dissipate and doesn't help restaurant owners and small distilleries, whose now-closed tasting rooms generate 40 percent of their total sales.
Many craft distilleries have been forced to lay off workers or suspend production. And some are wrestling with the decision to shut down permanently.
Overall, the distilled spirits industry and its supply chain accounted for more than $190 billion in GDP in 2018. The industry directly employs 848,000 people and is responsible for nearly twice as many jobs overall -- from farmers who supply grain, fruit and vegetables; to warehouse operators, distributors and truck drivers; to glassmakers who supply bottles. Jobs across this supply chain are now in jeopardy.
Obviously, the stimulus measures Congress has passed will help. The forgivable loans for small businesses and the streamlined underwriting process could provide short-term relief.
But we'll need industry-specific measures to ensure speedy and permanent recovery. For starters, suspending federal excise taxes for the 2020 calendar year and making temporary reduced rates permanent would bring significant relief to the industry.
Such measures would provide distillers with the liquidity needed to keep their distilleries running and employees working.
Here's how. The federal government collects a tax on spirits based on the amount of alcohol in the product. The rate is generally $13.50 per "proof-gallon," one gallon of liquid of 100-proof (50 percent alcohol) strength. Under the circumstances, waiving the excise tax for 2020 would be a smart move.
The administration should also keep reduced excise tax rates in place. Many Americans have noticed an influx of craft spirits at their local markets and in their communities over the last couple of years. One key reason was the 2017 tax reform package, which included the Craft Beverage Modernization and Tax Reform Act. The provision lowered the excise tax to $2.70 per proof-gallon for the first 100,000 proof gallons -- a huge boost to entrepreneurship in the industry.
The original tax cut was for two years, but last year Congress extended it through 2020. Thanks to a scheduled tax increase in January 2021, many distillers fear that by American life returns to normal, their federal taxes will climb 400 percent.
Over 70 members of the U.S. Senate and 342 members of the House have co-sponsored legislation to make lower rates permanent. The more Congress can do now to reduce future uncertainty, the quicker businesses will rebuild once the pandemic ends.
Chris Swonger is president and CEO of the Distilled Spirits Council of the United States.
