Legislation fermenting in Congress this session may mean a tax break for brewers.
Sen. Mark Udall, D-Colo., reintroduced the Brewers Excise and Economic Relief (BEER) Act on Wednesday, which would lower the federal excise tax that small and large brewers pay per barrel “so brewers can reinvest in their business,” Udall spokesman Mike Saccone said.
According to a 2012 study by the University of Colorado Business Research Division, Colorado brews more beer than any other state in the country, and Durango holds the highest number of breweries per capita in the nation.
Another study by the Beer Institute, a trade group that includes member companies such as Anheuser-Busch, found that the brewing industry created 5,000 jobs in Colorado and paid $65,442,700 in federal excise tax as well as $9,185,000 in state excise tax and $44,216,700 in other state and local taxes.
Udall’s bill cuts the excise for both small and large brewers. According to the current tax code, small brewers include those that make fewer than 2 million barrels of beer per year.
Under the proposed legislation, the $7 tax on the first 15,000 barrels per year would be completely slashed for small brewers. Large brewers would see a decrease from $18 to $9 on their first 15,000 barrels. Small brewers would pay $3.50 instead of $7 for 15,001 to 60,000 barrels, and large brewers would pay $9. Small and large brewers that produce 60,000 to 2 million barrels would pay $9.
The bill rolls back federal beer excises to their pre-1991 days. As part of a Congressional budget package that year that raised taxes on luxury items such as yachts and private airplanes, the federal government raised the beer tax from $9 to $18, according to the Beer Institute. Since then, Congress repealed taxes on those luxury items with the exception of beer.
But a tax break for brewers now could mean a big loss in revenue for the government. Up to 40 percent of what consumers pay for beer in retail goes toward federal, state and local taxes.
“It will reduce the tax receipts, but by increasing the number of jobs, you’re growing the base essentially,” Saccone said.
For others in the brewing industry, BEER isn’t palatable enough. Dave Thibodeau, president and co-founder of Ska Brewing Co. as well as a board member of the Colorado Brewers Guild, prefers the taste of BREW over BEER. The Small Brewer Reinvestment and Expanding Workforce Act (BREW), House Resolution 494, does not differentiate between small and large brewers as does the bill in the Senate. For any brewer producing fewer than 6 million barrels of beer per year, the tax would be $3.50 on the first 60,000 barrels of beer per year and $16 on the next 1,940,000 barrels per year.
“BEER is way too high of a cost to the federal government,” Thibodeau said. “Although Udall’s bill would certainly benefit me, I think it has very little chance of passing. That’s why I support BREW.”
U.S. Rep. Scott Tipton, R-Cortez, toured the Ska brewery in Durango last week after Thibodeau paid a visit to Washington.
“The difference between a Ska brewery and Budweiser is enormous. In terms of volume, Ska isn’t there,” Tipton told the The Durango Herald outside a hearing Thursday on Capitol Hill.
Ska employs 50 people and produces about 30,000 barrels per year, Thibodeau said. While Udall’s bill still would benefit him, Thibodeau doesn’t support it because he believes the revenue loss is too great.
“Over 6 million barrels cut in half, that’s a huge difference to the federal government,” Thibodeau said.
He also believes the Senate version gives an advantage to larger brewers. Craft brewers such as Ska hold about 6 percent of the market share while Anheuser-Busch and MillerCoors make up 90 percent, according to a report by National Public Radio.
“Those big guys are gonna save millions, while we save thousands,” he said.
Mark Harvey, general manager of Durango Brewing Co., won’t save as much as Miller, either. Harvey runs a smaller operation than Thibodeau, producing 3,000 barrels per year and employing six people.
“For our size, the tax is not reduced a lot, but any little bit helps,” Harvey said. “It certainly has more of an impact on brewers making 10,000 to 20,000 barrels a year.”
For smaller brewers like Harvey and Thibodeau, the cost of raw materials is a bigger hit than the excise tax.
“We’re getting hit by raw material cost increases – fuel cost, gas, electric and water,” Harvey said. “The (craft brew) marketplace is so competitive, we can’t raise our prices.”
Harvey said the decreased excise tax could help employ another individual or increase maintenance on their facilities.
“We’re doing maintenance every quarter now instead of every 30 days like we should,” Harvey said.
While the decreased excise tax could result in more employees, brewers say they probably won’t be able to lower the price for consumers.
“It probably would not affect it on a consumer level, but it would ease our financial picture a bit,” Harvey said.
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