With a bitterly divided electorate and a contentious presidential election coming, I am going to try to take a sober look at alcohol policy from the two administrations, and compare and contrast and determine who has the better policy.

Interestingly enough, neither of these men drink, Trump holds liquor licenses through his business, I have no evidence of Biden’s involvement in the industry.

In this analysis, I am not going through every alcohol related policy, but choosing to focus on major policy stances from the two candidates.

My views on this are limited to an analysis of the liquor industry and not any other issue.

Trump

  1. Tariffs, tariffs, tariffs

The Trump tariff policy on European wines was a disaster for the industry. In October of 2019, the Trump administration imposed a 25% tariff on wines from countries such as France, Germany and Spain.

The added cost for popular European wine made them less attractive for the U.S. consumer. The importers had to pay the tariff and it got passed onto the wholesaler and then onto the retailer. Sometimes the retailers could pass the cost on, sometimes they couldn’t, which led to lower profit margins.

European wines were not the only victims in the crosshairs. The American spirits industry also suffered from tariff wars. When the Trump administration placed tariffs on the import of steel and aluminum from the European Union, the European Union retaliated with 25% tariffs on the U.S. whisky industry.

The U.S. spirits industry lost $300 million in revenue based on the dispute as exports to Europe were down 33%.[1]

So, what will a second Trump term look like, will there be a repeat of trade wars and retaliation, or is this a temporary impasse?

What is not an optimistic sign is that Trump is proposing a 10% tariff on goods across the board coming into the U.S.

  1. Craft Beverage Modernization and Tax Reform Act

Great policy results for the liquor industry were achieved when President Trump lowered taxes for U.S. craft producers.

For beer producers, who paid $28 per barrel and $7 per barrel on the first 60,000 produced (must produce less than 2 million barrels to get this rate), would see their rates reduced by $16 per barrel on the first 6 million barrels and see the rate on the first 60,000 barrels reduced to $3.50 per barrel. For smaller brewers this cut their federal excise tax rate in half.

Small wineries previously were entitled to an excise tax credit of 90 cents per gallon on the first 100,000 gallons, with the benefit phasing out between 150k to 200k gallons. The law removed the phaseout and replaced it with a $1 credit on 30,000 gallons, 90 cents on the next 100,000 gallons and 53 cents on the next 620,000 gallons.

Previous to the Craft Beverage Modernization and Tax Reform Act there was no reduced rate for small distillers. The law reduced the excise tax from $13.50 per gallon to $2.70 per gallon for the first 100,000 gallons and a rate of $13.34 on the next 22,130,000.

The Trump administration provided great tax relief to the industry, especially to small producers. Small distillers were rewarded with a smaller tax rate than large distillers and hence makes their product more competitive.

The Trump Administration gets high marks for this law.

  1. Dietary Guidelines

The Trump Administration rejected a recommendation from a USDA and HHS panel, that moderate drinking be reduced from two to one drinks for day for men.[2] Interestingly enough, USDA and HHS officials said later “there wasn’t enough evidence to recommend stricter limits for alcohol.”[3] Which is interesting given that their original report found the following.: “Consuming the current limit of two drinks per day for men is associated with a “modest but meaningful increase” in death rates due to all causes, compared with just one drink per day, the panel found.”[4]

I believe the Trump Administration should be given high marks for not accepting a panel conclusion without hard evidence to back up its claims. Recommending that people should curb their moderate practices because it can cause cancer without the requisite empirical evidence is irresponsible and would result in great damage to the liquor industry.

Biden

  1. Report on Competition in the Markets for Beer, Wine, and Spirits

The Biden Administration via its Treausry Department released a report on competition in the alcohol industry. The report identified problems with the industry such as wholesaler consolidation, threats to competition, and excessive barriers to entry. It also addressed issues such as franchise protections for wholesaler over brands and its negative effects.

For bringing liquor industry problems to the forefront, the Biden administration deserves high marks. The cynic would say nothing has resulted from it, but it is important that these issues are discussed and provides credibility to these concerns, which is what the treasury report has done.

The Biden Administration deserves high marks and praise for its efforts

  1. FTC actions

Many of my allies will disagree with me on this point, but utilizing the FTC against Southern Wine & Spirits is a negative for me.

Utilizing the Robinson-Patman Act against Southern and essentially mandating no price discrimination will become detrimental to the industry. It will step into state laws and usurp state quantity discounting and channel pricing practices and will lead to higher prices for consumers.

Although FTC Chairwoman, Lina Khan is not Joe Biden, his administration is responsible for her actions.

  1. Dietary Guidelines

The Biden Administration has convened a six-member board to look into reassessing drink recommendations. They will review the current guidelines on whether men can limit themselves to two or fewer drinks per day and women no more than one drink.

Problematically, returning to the board is Canadian Tim Naimi who is strongly biased against the impact of alcohol.  His previous report was biased and dismissed by the Trump administration and somewhat walked back by the panel itself.

Further, this panel allegedly has a large Canadian contingent, Canada’s panel recommended more than two drinks a week is harmful.

Since the report will not be out until 2025, this area is an unknown. I am not optimistic and I don’t think the panel will opine positively, and one can wonder if President Biden will push back, but I wouldn’t count on it.

  1. Nutritional Labeling Requirements

In 2022, groups that are closely allied with class action lawyers filed a lawsuit against TTB for failing to act on a petition to require alcohol labeling be on parity with food products. The TTB relented and agreed to issue a proposed rule on nutritional labeling requirements.

Mandating nutritional labeling requirements will open the door to a plethora of lawsuits from class action lawyers against the industry. History demonstrates how the food industry has been subject to ridiculous lawsuits; the wine industry will be no different.

When the bottle of wine is opened and tested and the measurements are not exact, the lawsuits will begin. As wine changes character by age probably more than any other consumer good, this proposition is scary for the industry.

The Biden Administration’s compromise is a possible Road to Perdition for the industry and an economic boom for the class action bar.

I provide low marks for the Biden administration here.

Who has better liquor policies

Beauty is in the eye of the beholder, so my opinion is my own and nobody else’s. What I have done is taken some major policies, not all, and put it through my analysis. I am a believer in free markets and not everyone agrees with this position.

In the totality, I think Trump has better policies for the liquor industry. Although I am the first to acknowledge that his tariff policies were not good for the industry and his proposed 10% tariff on all goods gives me pause for concern.

However, he made major tax changes which resulted in significant tax reductions especially for small producers.

Further, he refused to kowtow to the HHS panel on alcohol recommendations that attack moderate drinking. Their evidence was not sufficient and the Trump administration was right to dismiss their position.

President Biden gets high marks for publishing the Treasury Report on competition. It brought important issues to the forefront and hopefully change will occur.

However, there are some aspects of the Biden Presidency that may have negative impacts on the alcohol industry.

The use of the FTC against Southern is troubling and utilizing the Robinson-Patman Act to usurp state alcohol pricing policies is government overreach.

I am not optimistic about the Dietary Guidelines Panel, which I think will follow the way of Canada and hurt the liquor industry with its recommendation. Why anyone would follow the road of the Trudeau government is beyond me!

Finally, I think the Nutritional Labeling Requirements, will lead to negative consequences for the industry.

Conclusion

I am not telling anyone how to vote or how I will vote, but just providing my analysis on a small area of policy.

What I enjoy most about the liquor industry is the non-partisan nature. In my legislative work, I have allies on the far left and far right that agree on policy. Liquor seems to transcend partisan labels. In the courts, judges of different ideologies are on similar sides on liquor issues and judges of similar ideologies end up on different sides.

In this piece I try to do my sober analysis. Neither man is perfect, although I prefer Trump’s policies overall, his tariff policy was very harmful to the industry and his new tariff proposal does not make me optimistic.

But there is enough there on the issues that gives me pause for concern on the other side.

Hope you and your family have a great 4th, celebrating the best country in the world.

 

[1] https://www.foodandwine.com/news/trump-tariffs-cost-whiskey-industry-300-million

[2] https://www.politico.com/news/2020/12/29/trump-admin-rejects-stricter-alcohol-sugars-451871

[3] Id.

[4] https://www.politico.com/news/2020/06/18/men-cut-back-alcohol-federal-recommendation-328893?source=email