Tuesday, January 2, 2018

Public safety alert: Americans could get more drunk than they expect because of tax law change

One small well-meant provision regarding wine in December's Congressional tax reform package could have a very damaging impact on public health and safety.

As part of the tax reform bill, Congress included elements of the Craft Beverage Modernization Act that had been kicking around Capitol Hill for a while. One important aspect is that it raises the amount of alcohol allowed in "table wine" from 14% to 16%. Previously, wines over 14% were taxed at a higher rate. Now, that higher-taxation line moves to 16%.

By itself, this is a good change that reflects the way wine is made in the United States today. But there's a catch that could be not just bad for wine lovers, but dangerous: label tolerance, or how much a winery is legally allowed to misstate a wine's true alcohol level on the label.

Currently, the label ABV must be accurate within 1.5% for wines under 14% alcohol, and within 1% for wines over 14%. However, because of the difference in taxation, 14% was a dividing line that a winery could not legally cross. A wine labeled at 13.5% alcohol might actually contain 12% or 14%, but it could not contain 14.1%.

Wine connoisseurs have known about this line and it has helped inform some people's choices. If you want a wine under 14% alcohol, you can confidently choose one.

More importantly, most ordinary American wine drinkers are blissfully unaware about how crucial this tax law has been for their relationship with wine.



The overwhelming majority of wines in America have been bottled at under 14% alcohol because of the tax law. So every wine drinker in America has grown up in a culture where a bottle of supermarket wine, if you don't look at the label, reliably contains about 13.5% alcohol. We know how big a glass we can have before dinner and still not burn the steak. Significantly, we know how many glasses of wine we can have at book club and still drive home. We don't have to make complex calculations: I can drink this much wine, and still be OK.

Add more alcohol to that wine without telling anyone, and you're going to get more burned steaks -- and more traffic accidents.

What will the TTB do? I don't know, and neither do they. I asked its director for congressional and public affairs, and he said, "We are currently assessing the impact of the changes made by the Tax Cuts and Jobs Act of 2017 on TTB forms, regulations, and systems, and will issue guidance and information in the coming weeks."

The TTB can make this transition safer in a way that I had hoped Congress would, had it considered the CBMA as separate legislation. Congress passed tax reform so quickly that it didn't have time to consider an issue like ABV label tolerance. But it's really, really important, and now the TTB must rule.

The best possible ruling for US consumers and public safety would be to adopt the EU standard of 0.5% tolerance. Every nation in the EU can bottle its wine with this standard, even countries like Bulgaria that aren't as technologically advanced as the US.

Failing that, the next best possible ruling for US consumers would be to keep 14% as an accuracy barrier that cannot be crossed. Our country's wine culture is based on this tax law.

At the very least, the TTB should apply the 1% tolerance standard to all wines. It's sub-ideal, and it will increase drunkenness, hangovers, etc.

But it's better than what I see as the nightmare outcome. If the TTB allows 1.5% label tolerance on all wines, that means supermarket wines currently labeled at 13.5% ABV could have as much as 15% ABV. People accustomed to drinking a certain amount of alcohol will suddenly be sipping a whole lot more.

That's dangerous.

I wish the wine industry would do the right thing and support accurate alcohol levels on wine labels, but I'm not hopeful. The industry generally fights any kind of labeling restriction. The spirits industry does a much better job of self-policing than wine, possibly because it gets more scrutiny on public health issues.  

ABV label tolerance is a public health issue. People should know how much alcohol they're drinking.

Once the TTB decides, the rule will be hard to change. The current label tolerance has been in place for decades. The future of American wine culture will be greatly affected by this TTB decision.

There is no page for public comment on this issue on the TTB site. Here is the TTB's Contact page. The best advice I can currently give for commenting is to call the Office of the Administrator at (202) 453-2000. If someone sees a better means of contact, let me know and I will update it.

You might also contact your Congressional representative. Don't take this for granted if you live in wine country. Your Congressional reps will do what their donors ask them to, unless you let them know they should represent consumers as well.

In a year, there might be no way for someone seeking a Pinot Noir under 14% alcohol to find one. Yeah, boo hoo. Nobody in Washington will weep if the TTB takes away the ability to shop for what we want.

But ... greater intoxication by unwitting consumers? Increased DUIs? It's a serious issue.

The 14% tax barrier kept us safe. Please, TTB, don't make our lives less safe.

Follow me on Twitter: @wblakegray and Instagram @wblakegray and like The Gray Report on Facebook.

6 comments:

Jon Bjork said...

As you pointed out, all of us compliance people in the industry are waiting on exactly how TTB will interpret the changes. One thing to remember is that Congress made a compromise and agreed to automatically expire all these changes after two years. So, wineries are going to use them to greatest benefit before the end of 2019.

Meanwhile, we have to spend time updating all our systems to track wine a bit differently, knowing that we may have to revert back to the over/under 14% cut-off. Reconciling with different state tax forms that have followed TTB's 14% cut-off is going to be very interesting. Time to get out the programmer hat.

I agree that a tolerance of actual to printed alcohol of 1.5% is not necessary nowadays, considering how quickly we can get lab results and how quickly TTB is approving label applications (under a week). The main leadtime consideration is that given by the label printer.

One very positive development is that there will be much less spinning off of alcohol, so perhaps quality will go up a small notch for wines that are naturally just above 14% currently. Less manipulation is often a good thing.

Unknown said...

Greetings,
I'm concerned alcohol is too much your scapegoat in your blog. As others have pointed out, the difference in ethanol content of a bottle of 13.5% (101.25mL) vs 14.5% (108.75mL) is insignificant. It amounts to a 7% increase in total alcohol concentration. To put that another way, let's say you pour yourself a glass of 13.5% alcohol: a 4oz pour. There is 15.82mL of ethanol in this glass. If you overpour by 1/4 oz, you have just poured yourself the equivalent of a 4oz pour of a 14.5% wine. Instead of consuming the 15.82mL in 4oz, you are drinking 16.92mL in 4.25oz. If you are dubious of your sobriety after a glass of 14.5% wine, I would question not the amount of alcohol consumed but how much sleep you got the night before, how healthy your diet was during the day, and suggest getting more exercise.
Cheers,
Benjamin Leachman

W. Blake Gray said...

Hey Benjamin, if I did a whole blog dedicated to lower-alcohol wines, that would probably be a sound business decision. I know the mass wine market isn't interested in alcohol percentage but a significant minority of wine drinkers are, and might pay for appropriate content. Unfortunately if I made sound business decisions I wouldn't be blogging, would I? Anyway, some wine drinkers care how much alcohol is in their wines.

Just to be clear, I am not at all against high alcohol wines. As Jon points out, I don't think 14.5% alcohol wines should be taxed at a higher rate than 13.5%. I don't think those wines should be manipulated down for tax purposes.

I just want to know what I'm drinking. When I buy jam, I look for the jam with the fewest ingredients. Ditto for most food products. But I can't do that with wine because other than Ridge (bless them) and I believe some of Randall Grahm's wines, nobody lists ingredients. But they DO have to list alcohol: it's the only thing they must list. I want it to be accurate.

And let's get back to my point: this IS a public health issue. Somebody said on Twitter that an unexpected change in alcohol level will only affect intoxication for people of a certain range of body weight: women under 130 pounds with average metabolism. Fine, but they drink wine and they matter.

Bob Henry said...

When we drink a "glass" (sic) of wine, how many fluid ounces is that?

More than you think, given that glassware does not come in standardized sizes.

A timeless article of advice . . .

From The Wall Street Journal "Personal Journal" Section
(May 1, 2007, Page D1):

"The Accidental Binge Drinker: How Much We Really Pour"

http://online.wsj.com/news/articles/SB117797544301787472#printMode]

By Tara Parker-Pope
"Health Journal" Column

jo6pac said...

Congresscritters wither demodog or repug will do what their paymasters want and not what the public wants.

I'm glad it won't effect my mad-dog 20/20 in any way;-)

Jon Bjork said...

TTB just sent another January newsletter via email, announcing that they have set up a new website focused on the changes at:

https://www.ttb.gov/alcohol/craft-beverage-modernization-and-tax-reform.shtml

Here is one of their wine Q&A entries:

W3: The Act has raised the maximum alcohol by volume content for the lowest still wine tax rate from 14 percent alcohol by volume to 16 percent alcohol by volume. Do the alcohol content labeling tolerance rules set forth in 27 CFR 4.36 still apply?

These tolerances remain unchanged. The recent tax law revisions, which amend a number of alcohol excise tax provisions in the Internal Revenue Code (IRC), do not affect TTB’s part 4 regulations, which are based on the Federal Alcohol Administration Act (not the IRC). TTB regulations at 27 CFR 4.36(b)(1) are set forth under the authority of the FAA Act and provide for an alcohol tolerance of 1 percent alcohol by volume for wines containing more than 14 percent alcohol by volume, and 1.5 percent alcohol by volume for wines containing 14 percent or less.