As summer quickly comes to an end, be sure to enjoy a cold beer or two because prices may soon be on the rise. At the end of the year, the temporary cut to federal excise taxes on alcoholic beverages will expire. If congress doesn’t extend this cut, the price of your go-to adult beverage will increase.
An excise tax is applied to products or services in order to curb consumer consumption for health, or even environmental reasons. The tobacco, gambling, alcohol, and gas industries are among those who fall victim to this extra cost. For example, alcohol producers are required to pay the Alcohol Tobacco Tax and Trade Bureau federal excise tax in addition to other taxes, like income, state and local taxes.
The Craft Beverage Modernization and Tax Reform Act (CBMTRA), part of the 2017 Tax Cuts and Jobs Act, temporarily decreased the excise tax rates paid by beer, wine and spirit companies—allowing them to reinvest more money into their businesses. This tax cut also encouraged more craft breweries to open up shop, increasing from 6,661 new businesses in 2017 to 8,275 in 2019.
However, the pandemic hit the beer industry hard. Many craft breweries rely on in-person consumption, and with government mandated shut-downs and limits to in-person dining, these businesses continue to suffer financially. If the excise tax cut is not renewed by congress before the end of the year, many of these brewers will have to increase prices for consumers to cover the increased tax. And, unfortunately, for some businesses, an increased excise tax could kick their keg for good.