M Live - Proposed Tax Cut for Small Distilleries Could Help Michigan's Spirit Business Grow

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A tax cut for small distilleries might help Michigan grow from the Great Beer State to the Great Alcohol State by lowering costs for new businesses.

U.S. Sen. Gary Peters, fresh off a tour of craft distilleries in the Traverse City area, is part of a bipartisan group of senators who introduced a bill to lower the excise tax on distilled spirits. The bill would lower the excise tax rate on distilled spirits from $13.50 per proof gallon to $2.70 for the first 100,000 gallons produced per year.

Michigan, already the country's leader in microbreweries, has the third-most microdistillers in the country with about 40 operating now. About 40 to 50 more are waiting for license approval, Peters said.

In an interview with MLive on Wednesday, Peters said this would help small distilleries get off the ground.

"If you're making whiskey, you need to distill it. You need a still, which is very expensive," he said. "Then, you need to put it in a barrel for three to four years before you can sell it. So that's a lot of capital you need to invest in; you need to have workers, you need to have a building, but you don't really see any revenue for a period of time."

As distilleries produce more booze, they would pay more in excise tax, Peters said.

In a state like Michigan, which has the second-most agricultural diversity in the county trailing only California, having more makers of craft alcohol could be a boon for the state's farmers as well.

Peters said bringing more liquor production to Michigan would likely mean more use of local Michigan crops to produce the spirits.

"People who go to a craft distillery ... they want to have local products," he said. "That means local hops, if you're a microbrewery, and local rye and corn if you're a distillery."

There's a long history of controversial federal taxes on whiskey, dating back to the first citizen revolt against the federal government during the Whiskey Rebellion of 1791.

Peters said the excise tax is "very high" and has bene something the federal government always relied on. But, lowering costs so more of these distilleries to open in Michigan could benefit many aspects of the state's economy, including tourism.

"Hopefully, we'll get more of that, and local production is a trend that's growing around the country," he said. "People like to have artisan products that are created locally, with local products and local workers."

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