As we transition into the delightful days of fall, the leaves on the trees are not the only thing developing hues of amber and crimson. Indeed, millions of Americans have made grabbing a rich pumpkin beer or a hearty brown ale an autumn tradition with friends and family. And today, this malted beverage offers more brands and varieties than ever before from local to global companies.
It is puzzling that a recent Treasury Department report concludes there has been growing concentration “at the distribution and/or retail levels for beer, wine and spirits, and at the production level for beer.”
The administration seems eager to shine a negative spotlight on the domestic alcohol industry — on beer especially — but empirical market data reveals a different story.
From the traditional massive light beer market to innovative micro-brew IPAs, it is undeniable that the beer industry offers consumers an enormous number of products from which to choose. The Treasury recognizes this, noting a “flourishing of small and craft producers in local markets.”
Given the self-contradictory nature of the report, it is perhaps unsurprising that the Biden administration overlooks the beer industry’s substantial contributions to the American economy. According to the Beer Serves America report, generated by the beer industry’s trade association, there are more than 92,000 Americans involved in brewing and importing beer, with more than 8,000 active beer company operations — demonstrating a dramatic growth from just 89 brewers in the late 1970s (a fact the Treasury report acknowledges).
While the administration’s claim of a lack of competition in the beer industry clearly falls flat, it is concerning that the White House is apparently looking for a justification to impose costly new rules and regulations on 70 million U.S. beer drinkers that could ultimately limit consumer choice and lead to higher beer prices.
Further, it is curious that a proposal ostensibly meant to protect American consumers does not delve deeper into other facets of the alcoholic beverage industry that are objectively at odds with consumer interests.
Take the rum cover-over, for example. This program is a classic example of government favoritism benefiting a handful of well-connected producers at the expense of everyone else. The rum cover-over transfers tax revenue from rum sales in the United States to Puerto Rico and the U.S. Virgin Islands, where most rum is produced. Initially designed to fund infrastructure for the U.S. territories, the rum cover-over has, in reality, created a tax haven for big distillers at the expense of local citizens.
Unfortunately, the rum cover-over is not the only example of the liquor industry using government favors to boost its bottom line. Another instance can be seen in Internal Revenue Code (IRC) 5010, a little-known tax loophole that gives large liquor companies an excise tax reduction for adding all kinds of odd, and often artificial, flavorings to their products.
Because the liquor industry does not have rigorous labeling guidelines, consumers are often uninformed about what additives have been put into liquor products. Policies like the rum cover-over and IRC 5010 may help boost the profits of large liquor corporations, but they harm consumers by keeping them in the dark and providing lower-quality products. If the administration were serious about helping alcoholic beverage consumers, it would prioritize repealing or reforming these outdated laws instead of targeting the beer industry.
Further, the administration should ensure that the differences between beer and liquor remain crystal clear. Just a few years ago, Congress made permanent the Craft Beverage Modernization and Tax Reform Act. This extremely popular, bipartisan bill reinforced that beer, wine and spirits are different products and must be taxed differently. Any change to this status quo would disproportionately affect one part of the alcohol sector to the detriment of the others. It’s vital that the administration adheres to this before it takes any action that could put a finger on the scale.
Despite our nation’s many pressing issues, the administration seems intent on attacking the beer industry, which is a significant contributor to our economy and, due to healthy competition, has never offered consumers more options than it does today. If policymakers were serious about promoting consumer welfare, there are far more worthy options in the alcoholic beverage space for them to look into.
