LIQUOR: Tax Tempest

Across the U.S., liquor distillers, wholesalers and retailers last week heaved a mighty sigh of relief. After a long, bitter industry fight, the whisky business finally had a new set of excise tax rules. Under the Forand bill, which was last week signed into law by President Eisenhower, distillers no longer must pay the excise tax of $10.50 per gal. on liquor held in Government bond upon withdrawal or automatically after eight years of storage. They now may hold it up to 20 years without paying the tax.

When the Korean war came, many U.S. distillers, recalling World War II shortages, began laying down heavy liquor stocks. But there were no shortages, and stocks piled up. Fearful of having to pay the tax after eight years, stocks were dumped on the market (often under new brand names) at cut-rate prices. Most distillers agreed that some kind of relief was necessary to eliminate price wars, but differed on what.

Leading the fight for tax relief was Schenley Industries, which favored granting tax relief to existing and future whisky stocks. Among Schenley’s arguments: only in this way can U.S. distillers compete with the British and Canadians, whose governments have no force-out tax provision. Against Schenley stood Joseph E. Seagram & Sons. Seagram argued that Schenley held 60% to 70% of all the old whisky in the U.S., hence would reap the major benefit. Seagram backed a different proposal of the Distilled Spirits Institute: grant tax relief, but prohibit distillers from labeling their whiskies as over eight years old until all companies have built up big inventories of cobwebbed stocks.

Congress decided the issue Schenley’s way. Last week Schenley President Lewis S. Rosenstiel said that his fight was not for Schenley alone, pointed out that virtually every distilling stock has risen since Congress acted, many to new highs. (Schenley’s rose the most, from 18½ earlier this year to 31½.) Distress selling of whisky to collect the tax is now over, said Rosenstiel, and there is no reason for “senseless” price wars.