There are so many reasons people and industries complain about the way Washington sets federal tax rates. They’re too high. They’re too low. And especially: They’re inconsistent. Why do race-car track owners and coffee roasters get special breaks, while hammock makers and hot dog sellers don’t, for example?
Makers of hard apple cider have their own complaint. Their tax rate can change every year, depending on how strong a batch they’ve brewed. Bloomberg BNA’s Marc Heller explains:
When the alcohol content is less than 7 percent, the tax is the same as on beer, or 22 cents per gallon for large producers. Small producers receive a discount and pay 17 cents per gallon. When the alcohol content exceeds 7 percent, cider is taxed as wine, based on a sliding scale that goes as high as $1.07 per gallon for producers making more than 100,000 gallons a year, reported the U.S. Association of Cider Makers, a coalition created by producers in 2013.
That’s not all. The fizziness of the brew also affects cider makers’ tax rate. “Cider with more than 0.39 percent carbon dioxide is taxed as champagne, bringing the total tax burden to as much as $3.40 per gallon,” Heller writes.
The hard cider industry says the structure isn’t fair because the fermentation process, along with climate and growing conditions—things that aren’t always within a brewer’s control—affects the drink from one year to the next. Brewers want Congress to pass legislation changing the tax code so they’d be taxed every year at 22¢ per gallon, the same rate that beer brewers pay. A group of lawmakers are already on board and have introduced a bill called the Cider Industry Deserves Equal Regulation Act. (CIDER Act, get it?)
The impulse is reasonably easy to understand. It’s hard to run a business and make future plans when there are unpredictable variables on top of the more predictable ones. The hard part is that over the years, the 4-million-word tax code has been loaded up with a list of quirks so long you get dizzy just thinking about it.
Congress is embroiled in a massive rewrite of the code for the first time since 1986. But the effort is proving so fraught that Senate tax writers are offering an unheard-of level of secrecy for lawmakers willing to say what breaks they want to keep. It’s only going to get harder as more and more industries pound Congress with requests for special treatment.