Breweries across the country are saying ‘Cheers’ to a proposed BEER Act.
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“As a small business, we face a lot of unique differences in the economy’s scale,” said David Thibodeau, president and co-founder of Ska Brewing Co. in Durango, Colo. “We have higher costs for production, packaging, getting our beer to market and raw materials.”
Thibodeau said he is hopeful he may soon be able to offset those higher costs and grow his staff fast enough to keep up with demand, if a new Congressional measure comes to pass.
The Brewer’s Employment and Excise Relief Act, introduced this month by Sen. John Kerry (D-Mass.) and Sen. Mike Crapo (R-Id.), would cut excise taxes for the nearly 1,700 small craft breweries nationwide. Brewers currently pay $7 per barrel on their first 60,000 barrels, the act would cut that figure in half, theoretically giving small breweries more money to invest back into their businesses. For breweries making more than 60,000, the rate would fall from $18 to $16.
Breweries that make less than two million barrels per year are considered craft producers; however this act would raise that number to six million barrels annually. The measure has 23 co-sponsors to date, and a House of Representatives version is expected soon.
For Ska Brewing, which produces 15,000 barrels per year, the measure would save an extra $52,500 annually.
“A tax break like this would be wonderful, because I know for a fact that we would reinvest it into the business and community,” Thibodeau said. “To take this burden off of small businesses is great. Creating 45 jobs in a town like Durango has a big impact.”
Bob Pease, chief operating officer of the Brewers Association, said that small brewers today only make up about 5% of the total beer market in the U.S., but employ nearly 50% of the jobs in the beer industry. He argued that this excise cut would give smaller breweries the chance to stimulate their businesses and ultimately grow jobs.
“Beer excise taxes were put into place to fund the Civil War,” Pease said. “They are not levied on whether you are profitable or not. We kind of consider them regressive, but understand they need to be paid. If the rate is cut, it’s significant for a small brewery.”
Pease said that one barrel of beer is 31 gallons, and for every 1,000 barrels of beer a brewery grows, they hire on average about one full time employee.
A March 2010 economic impact study by Dr. John Friedman of Harvard University, which assumed a passage date of January 1, 2010, found that the proposed reduction in the federal excise tax on beer produced by small brewers would increase economic activity by $116 million in 2010 and $734 million over five years. The same study found that the bill would create 4,200 jobs over the next five years, with 2,700 of those jobs created in the first year and 375 in each subsequent year.
Kris Oyler, co-founder and CEO of Steamworks Brewing Company, also located in Durango, Colo., said the money would create significant job growth. Steamworks brews about 1,400 barrels a year because it is primarily a restaurant, but would be able to hire a part-time employee with the $5,000 it would save annually.
“This provides some equalization,” Oyler said of the measure. “Small businesses need some help. These laws were made in the 1970s, when there were roughly 40 craft breweries in the U.S. That has grown to over 1,500. We need to update our legislation.”