Alcohol Tax Evaporates -- for Now
For years, the National Assn. of Convenience Stores has lobbied Congress to repeal a century-old federal tax on manufacturers and retailers of alcoholic beverages. It has always come up short -- until now.
A massive business tax overhaul bill sent to President Bush this week would suspend the long-debated alcohol tax, underscoring important political truths in Washington: Persistence pays off, particularly if you hitch your cause to the right bill -- in this case a year-end, must-pass measure.
“I think the sun, moon and stars aligned,” said Rep. Dave Camp (R-Mich.), who has pushed for the tax’s repeal.
The corporate tax bill was originally drawn up to repeal an export tax break that the World Trade Organization had declared illegal. To make that tax measure as attractive as possible, authors encouraged lawmakers to attach their pet tax breaks to the bill.
That gave lawmakers a free ride for long-sought tax breaks benefiting a host of interests, such as fishing-tackle-box manufacturers, bow-and-arrow makers and the horse racing industry.
Rep. Robert T. Matsui (D-Sacramento), who has pushed for the alcohol tax’s repeal for several years, said it too benefited from the “feeding frenzy.”
Keith Ashdown, who monitors Congress for the watchdog group Taxpayers for Common Sense, said the tax’s suspension showed how business groups “point their lobby weapons at dozens of legislative targets and pray that at some point that they will hit something.”
Business groups have been shooting at the tax on manufacturers and retailers of alcoholic beverages since at least 1986, when the tax was increased to help lower the federal budget deficit. The tax is $250 per location on retailers of alcoholic beverages, $500 per location on wholesalers and $1,000 per location on manufacturers.
Proponents of the tax’s repeal came close but failed year after year.
“It’s taken so long,” said Allison Shulman, director of government affairs for the National Assn. of Convenience Stores, which represents establishments as big as 7-Elevens and as small as mom-and-pop stores.
For example, repeal was tucked into a military-tax relief measure last year but stripped out after a controversy erupted over the tax breaks for special interests. This year it was part of a highway bill that ironically included measures to crack down on drunk driving. But the highway bill has stalled because of a dispute over its cost.
Finally, with time running out in the congressional session, proponents of the tax’s repeal were able to attach at least a three-year suspension to the bill to end the illegal export tax break.
The tax brings in an estimated $78 million a year, so a three-year suspension would cost the U.S. Treasury $234 million. Shulman acknowledged that the suspension’s relatively low cost added to its appeal. “It doesn’t have such a large budgetary impact that those folks who are budget hawks would stand up and scream,” she said.
The National Assn. of Convenience Stores was joined in lobbying for the repeal by the National Beer Wholesalers Assn., the Wine Institute and, perhaps most important, the Congressional Wine Caucus, a bipartisan group of lawmakers from every state. They enjoyed the support of the influential House majority leader, Tom DeLay (R-Texas).
Opponents of the tax argued that repeal would benefit small businesses -- from small wineries to neighborhood taverns -- and fit in with the overall bill’s goal of promoting economic growth. They said the tax, which dates to the Civil War, is unfair, because a chain of five neighborhood food stores, for example, paid more than a large distillery.
Proponents of repeal said they were pleased at least to get their foot in the door.
“While we would love for it to be a full repeal,” Shulman said, “we’ll take the three-year suspension.”
