Small brewers need a tax code that furthers economic development and job growth.
THE craft beer industry in Washington state is growing. More than 220 small and independent breweries employ more than 9,000 people and generate a $1 billion dollar economic impact on the state, according to the Brewers Association, craft beer’s trade association.
Consumer demand for innovative, diverse styles of beer is driving the growth of the craft sector, but small brewers face tremendous challenges to stay afloat in the perilous waters of the greater beer industry.
We pay significantly higher costs than our well-established multinational competitors, such as Anheuser-Busch InBev, headquartered in Belgium, and SABMiller (the parent company of MillerCoors), headquartered in London. Because of our differing economies of scale, small brewers pay significantly higher costs for quality raw materials, customized production equipment, packaging, financing and overall market-entry initiatives.
Moreover, threatened by craft beer’s increasing — but still minor — market share, these big brewers slow our growth through distribution practices that restrict our access to shelf space in stores and tap handles in bars and restaurants.
One way to level the playing field in light of these disadvantages is through smart beer excise-tax policy. Currently, taxes levied on the production, distribution and retailing of beer amount to more than 40 percent of the retail price. Small brewers would like to retain a higher portion of their earnings to reinvest in employment opportunities and production capacity.
The Small Brewer Reinvestment and Expanding Workforce Act is a bipartisan bill under review in Congress that would recalibrate the federal beer excise-tax rate for America’s small brewers. The legislation would reduce the federal excise tax paid by small brewers on the first 60,000 barrels (one barrel is 31.5 gallons) of production by 50 percent — from $7 to $3.50 a barrel.
So, what is “small” and what is “large” in the brewing industry? Consider this: The largest craft brewer in this country produced 2.7 million barrels in 2014, whereas Anheuser-Busch InBev’s domestic production was 95 million barrels. That’s a difference of more than 4,600 Olympic size swimming pools of beer. Its global production volume is about 325 million barrels per year.
The Small BREW Act is a top priority for Washington’s small brewers and would directly and positively impact every brewery in our state. At Fremont Brewing Company in Seattle, for example, we would use the retained capital to offer a more robust health-care plan with a lower annual deductible for our employees.
Nationally, the bill would save small brewers about $65 million a year — money that we’ll pour right back into the nation’s economy. Based on a 2013 study by John Friedman at Brown University, the Small BREW Act would create more than 5,000 jobs in the first 12 to 18 months after passage and generate approximately $183 million in economic activity in the first year.
Craft brewers represent ingenuity, innovation and economic opportunity. Our breweries are an integral part of our local landscape, creating jobs in communities across the country. Small brewers need a tax code that further boosts our track record of economic development, production expansion and job protection.
The excise tax on small brewers has not been modified since its inception in 1976 when there were only 30 small brewers in the country. Today, there are more than 3,200. The Small BREW Act is the policy we’ve been waiting for and is strongly supported by the Washington Brewers Guild. We thank U.S. Sen. Maria Cantwell, D-Wash., and U.S. Reps. Jim McDermott, D-Seattle, Suzan DelBene, D-Medina, and Rick Larsen, D-Everett, for co-sponsoring this legislation. We look forward to working with all of Washington’s congressional delegation to ensure its passage.