Beer Institute Report

State of the Industry

The first session of the 105th Congress was the busiest we have had in the 1990s in terms of legislative threats. We can expect more of the same, although our victories on excise taxes and advertising restrictions may help prevent votes on these topics next year.

These proposals have been defeated or held up primarily as a result of the combined personal relationships of our Washington Representatives Group and the credibility that our industry has established. We need to constantly remind members of Congress that brewers are strong contributors to our national economy. We must also underscore brewer initiatives to encourage responsible use of our products.

Our strategy in Congress is to seek opportunities to be proactive on issues such as the excise tax rollback. Beer Institute also supported legislation that increased funding for innovative state programs to reduce underage drinking. We must be prepared for a new excise tax debate. Anti-alcohol groups are pointing out to their friends in Congress that another excise tax increase or indexation will not hurt our industry in the current robust economy.

We can expect other punitive measures in Congress as debate over broadcast advertising by distilled spirits companies continues in the year ahead.

Our credibility in Congress has been helpful. The excise tax rollback bill has over 100 cosponsors in the House of Representatives, a real tribute to the efforts of brewers and wholesalers working together to protect our industry. We must remain vigilant. A technical tax bill is likely to work its way through Congress next year to correct errors made in the major tax bill enacted in 1997. A smaller bill can be more threatening because it invites tinkering with revenue sources such as excise taxes, where a "per-unit" tax increase sounds negligible.

We know from bitter experience that such "tiny increases in the cost of a beer" are deceptive and devastating. Excise tax increases are focused on a single industry and cause great disruption throughout the marketplace.

Many in Congress continue to seek fundamental changes in the tax system, such as some form of national consumption tax. Any such tax imposed on top of the existing federal excise tax would put our products at a terrible disadvantage in the increasingly crowded beverage marketplace.

The combination of Beer Institute's lobbyists, company Washington representatives, and a strong grass roots base of responsible industry members has been very effective this year on some difficult issues. One of the biggest challenges faced by Washington representatives is that effectiveness is often measured by things that don't happen to the industry. Brewers have survived in a heavily regulated industry by recognizing this fact, and responding with appropriate resources and active participation in the legislative process. By maintaining a strong presence in Washington, we can educate Senators and Representatives and quickly respond to the constant and unwarranted attacks of our critics.

Several serious legislative threats faced brewers last year:

-An amendment to tax and budget legislation that would have denied the federal advertising expense deduction to the alcohol beverage industry was defeated on the floor of the United States Senate.

-A three part provision imposing an alcohol billboard ban in the District of Columbia, increasing ABC enforcement dollars, and requiring a General Accounting Office study designed to support an excise tax increase was modified to eliminate the billboard ban.

-An amendment indexing all alcohol beverage taxes to inflation was withdrawn in a Senate Committee.

-An amendment giving the Federal Trade Commission $2-3 million to conduct redundant studies on alcohol advertising was modified.