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FET REDUCTION BILL ONE PAGE DESCRIPTION


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Small Distiller Parity

Support the recent expansion and encourage further growth of small U.S.-based spirits manufacturing by

creating a reduced federal excise tax rate for small-scale distilled spirits makers, creating parity with the

current reduced tiers for small beer and wine producers.

Problem

Small Craft Distillers are attempting to enter the market every day to join what is one of the most

significant and exciting domestic manufacturing growth industries in the United States. These small

manufacturers purchase local agricultural products, create jobs and support their local economies through

payroll, property and other taxes, and tourism but are thwarted by a disproportionate tax burden that puts

them at a substantial competitive disadvantage.

Background

The distilled spirits industry has enjoyed a renaissance of local, artisan production of unique spirits over

the last ten years. Our numbers have swelled from less than 40 licensed makers in 2003 to more than 400

in 2012. Because of these efforts, consumers in America and abroad are beginning to experience

innovation and quality in spirits similar to that which took place with micro-brewers in the 1980s-1990s

and independent winemakers in the 1970s-1980s.

What made the growth of small beer and wine makers possible — other than hard work and passion —

was a reduced federal excise tax rate that allowed them to successfully make and sell artisan products

without the economic benefits of extremely large-scale production.

Today, small-scale beer producers pay 39% of the full federal excise tax that medium and large

producers pay. Similarly, small producers of average-proof wine (<14% alcohol) pay 18% of the full

rate. To put this in context, small beer producers pay $0.02 vs $0.05 in federal excise tax per 12 oz can,

while small wine producers pay $0.04 vs $0.21 per 750 ml bottle. By contrast, small spirits makers pay

the full rate $2.14 per 80-proof 750 ml bottle of spirits.

Solution

Small-scale spirits producers need a similar reduced-rate federal excise tax structure to continue to

innovate, create U.S.-based manufacturing jobs, support U.S. agriculture, support tourism through visitor

centers and tasting rooms, and compete effectively in the marketplace with reasonably-priced handcrafted

spirits.

The following reformed tax structure will bring balance and equity to smaller distilled spirits producers:

Tier one/Above 100,000 proof gallons — 100% rate

Tier two/First 100,000 proof gallons — 20% rate

Benefits

This tax reform will enhance the continued growth of an “American heritage” industry that expands

support of domestic agriculture and increases exports of American goods. Further, it will allow craft

distillers to continue to innovate, create U.S.-based manufacturing jobs, support U.S. agriculture, support

tourism through visitor centers and tasting rooms, and compete effectively in the marketplace with

competitively-priced handcrafted spirits.

Finally, this tax streamlining will result in a negligible short-term revenue impact while promising a

significant increase in federal revenue as the domestic craft distilling industry grows.

Contact: Ralph Erenzo (845) 797.9010 or Mark Shilling (512) 426.2796

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