Sin Tax Fight Brewing for Next Congress

Posted June 18, 2008 at 6:30pm

A sin tax never looks as good as when there is a budget shortfall.

But despite the economic outlook, the beer industry is doing its best to convince the next Congress to roll back the excise tax levied in 1991.

Lobbying for a tax cut in the current political environment may not seem like sound strategy, but for beer, it’s a pre-emptive strike.

The Beer Institute, a trade association composed of beer manufacturers and importers, has been lobbying to repeal the tax increase since the 1990s.

This month, the group reached an important milestone: 229 co-sponsors of its bill — more than half of the House — supporting the rollback of a law that raised taxes on a barrel of beer from $9 to $18. For Joe Sixpack, that tax adds an additional 33 cents per purchase.

The number of co-sponsors is a significant victory; excise taxes, especially on activities that lawmakers want to reduce, such as cigarette smoking, drinking and oil use, are rarely repealed.

Still, despite the momentum, the rollback legislation isn’t likely to take off anytime soon. Even the association’s president, Jeffrey Becker, concedes that they aren’t optimistic of its chances of passing as standalone legislation.

Instead, the group is using the legislation as a defensive measure heading into next year.

“We have put a significant amount of energy into this while recognizing in the current environment there is not a lot of discussion of broad-based tax relief,” said Becker, who just celebrated his 20th anniversary with the Beer Institute. “Our goal here is to keep the issue in front of Members.”

In addition to meeting with lawmakers and staff, the group has gone on the offensive with a small-budget ad campaign. Becker declined to discuss the specifics of how much the group is spending on its campaign, calling it more of a “shoe leather” operation.

The institute has also reached out to beer wholesalers and small brewers to garner support.

While the institute has taken the lead on pushing the bill, National Beer Wholesalers Association President Craig Purser and Brewers Association President Charlie Papazian say they are both supportive of the group’s efforts.

Indeed, the Brewers Association is keen on making sure Congress doesn’t touch its small-brewer exemption that allows brewers who produce less than 2 million barrels of beer yearly to pay only $7 a barrel of tax on the first 60 barrels produced.

“That tax differential is very, very important,” Papazian said. “As far as increasing taxes, that would just be a very, very regressive policy and really particularly damaging to small brewing businesses.”

The 1991 tax package included a luxury tax on boats, furs and cars, but over the years they have all been rolled back, a fact that the Beer Institute makes sure to point out in its lobbying pitch.

“Why should a guy buying a Rolex pay no excise tax when a guy buying a six-pack has to pay an excise tax?” Becker asked. “I can remember running our campaign during the budget summit [in 1990] and asking, ‘Which do you pay more for, a diamond bracelet or a can of beer?’

“While it might not have made our friends in the jewelry industry happy, low- to middle-income wage earners are the last people who need to be taxed more.”

Alcohol became a target after a multiyear campaign in the 1980s, spearheaded by Seagram’s to equalize the tax rates of spirits with those of beer and wine.

Liquor had long been taxed at a much higher rate than wine and beer. In 1990, that differential changed.

Of the industries usually associated with the sin tax, beer is alone in its fervent efforts to repeal the tax.

The Distilled Spirits Council of the United States also has a bill in the House that would repeal the tax on alcohol to pre-1984 levels, but the group hasn’t made it a big priority. So far, it has 32 co-sponsors in the House.

“Alcohol is probably the highest-taxed consumer product with the exception of tobacco, and we don’t like that,” said Mark Gorman, a lobbyist for the distillers. “We don’t think it’s fair or appropriate policy.”

Yet the groups haven’t worked in concert to push lawmakers on the issue. Although they’ve had talks in the past, Becker said the industries were never able to get a consensus on legislation.

Tobacco hasn’t made a push, either, according to lobbyists.

“I wish I could be in their position to try this,” said Andrew Zausner, head of Dickstein Shapiro’s lobbying practice, which counts Lorillard Tobacco as a client.

Other industries might do well to take a similar tack as the beer industry, according to Americans for Tax Reform’s Ryan Ellis.

“If you are a lobbyist working for one of these trade associations, you have to assume you are going to be a target,” Ellis said. “It’s just a question of when.”