Hey remember that scene in the first Pirates of the Caribbean movie when Jack Sparrow is docking his ship in Jamaica, and the harbormaster says, “It will be one shilling and you have to give me your name.” Jack counter-offers with three shillings to forget the name.
The harbormaster smiles and pockets the bribe … but as Jack walks on shore he notices the official has left a purse of moneys unattended on his desk and swipes them.
That’s basically what the hard liquor industry is trying to do with our tax code.
At stake is the issue of so-called “duty drawback,” which according to US Customs is the refund of duties, taxes, and fees collected on imported goods used in domestic manufacturing. The goal is to provide a refund (or “drawback”) to help domestic business with international supply chains.
The practice is as old as America, included in the Hamilton Tariff Act of 1789, literally the first real piece of legislation that George Washington signed into law. It enumerates — at the top of the list of affected commodities — the kind of “distilled spirits of Jamaica” that Jack would have drunk to celebrate reaching a safe harbor.
And the hard liquor industry (let’s call them Big Booze?) is pulling strings on Capitol Hill to try to expand this sweet tax break.
Working their way through Congress are bills to clarify duty drawback, H.R. 4073 and S.1761, which would give Big Booze an effective tax rate of zero when they import spirits produced on foreign-soil.
See, when whisky or similar is imported to the U.S., the importers get the drawback refund but they want to expand this tax provision.
Under current U.S. law, such commodities can only be substituted for the drawback when their 10-digit Harmonized Tariff Schedule (HTS) codes match. The HTS code is so the government knows which duties to apply to which products. (The whole idea of buying “duty free” alcohol in airports is to circumvent this.)
The multinational importers who want to “harmonize” these tariffs stand to gain billions. The goal is to sneak this legislation into an omnibus spending bill to snatch money away from taxpayers.
In its latest budget and economic outlook, the Congressional Budget Office lowered its projections on taxes on alcohol and tobacco from 2022 to 2031 by about $17 billion because of drawbacks like these. Even in Washington, $17 billion is a lot.
Larger producers will avoid excise taxes, funnel that money back into their business, and crush small, local craft distillers. Because, of course, the last four years — between COVID and Bidenflation — haven’t been ruthless enough for small businesses.
You can call it crony capitalism, the government picking winners, or whatever. In Jack Sparrow’s day, I think they called it “mercantilism.”
One wonders why Big Booze is picking now to make a full-court press on this kind of tax trickery; it’s possible they’re worried about the effect marijuana legalization could have on their bottom line. If that’s true or not, it’s not the American taxpayers’ job to subsidize them.
A simpler tax code could be a great wedge for Republicans, one that aligns ideologically with both the libertarian and populist wings of the party. This could be great for President Trump, especially in light of the Biden administration’s jackbooted expansion of 87,000 IRS agents to kick in our doors and take our money.
Since Trump’s injection of economic nationalism into the party, Republicans are no longer towing the line for Big Business, Big Pharma and the military industrial complex — this is something the folks on the other side should be cheering, rather than constantly denouncing him.
The more complicated the tax code, the more it benefits only the wealthy and powerful. Dilbert creator Scott Adams succinctly described our tax system as “just welfare for lawyers.”
With crushing budgets deficits and no end in sight, that’s not what we need. Big Booze should pay their fair share and keep their hands off our purse of moneys.
Jared Whitley is a longtime politico who has worked in the U.S. Congress, White House and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's reports — More Here.