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Congress Seeks Tax Cut for Small Breweries (rev)
In a rare sign of unity, Congress is considering legislation that would give small beer companies or “craft breweries” a 50% tax cut on beer they produce to help small beer businesses expand and create jobs.
Congress likes tax cut for BEER (Photo by S. Abrams)
Background on Congressional Legislation
In an effort to help small beer businesses have more money to expand and create jobs, Congress on both sides of the Capitol and across the aisle have introduced legislation that would give these or what is referred to in the beer industry as, “craft breweries,” a cut in the excise tax they pay per barrel of beer. The Senate has introduced S 534, the Brewers Employment and Excise Relief bill or BEER Act in early March. Last week, the U.S. House announced a similar bill, the Small Brewer Reinvestment and Expanding Workforce Act, HR 1236. The Senate bill works this way (the House mirrors it): at the present time, these small brewers pay a $7.00 excise tax on the first 60,000 barrels of beer per year they brew. The BEER ACT would cut that tax by 50% to $3.50 per barrel. After that number, brewers pay $18.00 per barrel, but the bill would reduced the tax by $2.00 to $16.00 a barrel.
Defining the term: Who is a Craft Brewery?
Impact of BEER bills on one local brewery
Capitol City Brewing Company came on the scene in 1992. It now has three brew pubs in the Washington, D.C. area, and makes four styles or brands of beer:Amber Waves Ale, Capitol Kolsch, Pale Rider Ale and Prohibition Porter. Throughout the year, it makes three to five flavors such as Cherry Blossom beer for the Cherry Blossom Festival. Mike McCarthy, Director of Brewing Operations at the brewery, says a reduction in the excise tax means the company could expand and hire more people.
A 50% tax cut creates jobs: Harvard Beer Study
Harvard Prof. John Friedman, author of the beer study. (Photo from Harvard Unv. website)
During these rough economic times, job creation is critical. Harvard Prof. John Friedman, conducted a study last year for Brewers Association when HR 4278 was introduced in the House. According to the HR 4278 Economic Impact of Small Brewers Excise Tax Reduction Study, the bill would create $116 million in economic activity. Over a five year period, it would generate more than 2,700 new jobs over the first year to 18 months and after that, an average of 375 new jobs per each of the remaining years. How is this possible? Due to the direct and indirect effects from these types of tax changes, Friedman can predict the impact on employment or what he calls the “multiplier effect.”
Craft Breweries: A Growing Niche
Capitol City Brewing Company is in a niche business area that is growing. In March, the Denver-based Brewers Association, an industry trade group, released sales figures for 2010. Craft beer brands represent 7.6% of all U.S. beer retail sales in 2010 – that is up from 6.9% in 2009. Overall, sales in the U.S. beer industry were down about one percent. In terms of actual dollars, sales by craft breweries climbed $7.6 billion in 2010 from $7 billion, the previous year. And there is more good news for the niche industry. The number of specialty breweries in the United States has grown by 129. Last year, there were 1,759 small breweries versus 1,630 in 2009.
Chances of Beer Act passage?
Despite the fact that many members of 
congress have signed on to show their support for the respective bills in each chamber, it may come down to what gets done with tax reform first, says one industry executive. With Republicans in the majority in the House, Rep. Dave Camp, a Republican from Michigan, is chair of the powerful Ways and Means committee.Bob Pease, Chief Operating Officer, of Brewers Association, is not entirely optimistic at this point.
One Founding Father’s quote on Beer
The Brewers Association has more information via these links to the study, HR 1236, S 534
Beer Madness is down to the final four
This week, four small, independent beer brands (out of the original 64) battle for supremacy to be named the best craft brew of the year. The scene of this annual event is Birch & Barley/Churchkey in Logan Circle. Check with the restaurant for when the judging begins.
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Congress wants to help the growing brewery niche.