Beer and Taxes

At the end of January Congress introduced the Craft Beverage Modernization and Tax Reform Act. The bill would reduce the tax rate for large and small brewers. Both the Beer Institute which primarily represents mega brewers such as Anheuser Busch InBev and the Brewers Association which is the trade organization for craft brewers support the legislation. Similar legislation was proposed in the last Congress but did not pass. The prior bill had bipartisan support as does the current legislation.

Small brewers who produce less than two million barrels (a barrel is thirty-one gallons) annually would have a reduced rate of $3.50 a barrel for the first 60,000 barrels. All other would have a reduced rate of $16 per barrel for the first six million. The current rate of $18 a barrel would remain for companies that produce more than six million barrels a year.

The beer industry has been trying to reduce their taxes since 1991 when the rate of $9 a barrel, in effect since 1951, doubled to $18. The small brewers differential, enacted in 1976,  defines small brewers as those who produce less than two million barrels. These producers currently pay a reduced rate on their first 60,000 barrels.

The proposed legislation keeps that definition but creates another tier for brewers who produce between two and six million. Thus there is something for everyone in the bill. Mega brewers get some tax relief, small brewers who represent the vast majority of the 4,269 American breweries keep their differential  and some craft brewers like Boston Beer who have outgrown the current small brewer definition also get some relief and more importantly  get to maintain the cachet that goes along with being a craft brewer rather than a large brewer, It is not an accident that the name of the legislation includes the phrase “Craft”.

Although brewers are hopeful that the proposed legislation will succeed in the  current Congressional term, it is not clear that , after twenty-six years, they will finally achieve their goal of tax reduction. The current President is a teetotaler and he will need revenue for some of his deficit enlarging schemes such as a massive tax cut for the rich, the border wall and infrastructure projects.

Excise taxes are a very stable source of revenue that the federal government has relied on to supplement internal revenue since the 1930s. Time and again from the Civil War on, when the state has faced a shortfall they have  looked to the liquor industry to make up the gap. If the bill was not successful during the Obama administration I  don’t see why it will be any more likely in 2017.

This entry was posted in Beer, Business, Craft beer, History, Liquor Industry, Politics, VB6 and tagged , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *