Beermakers Battle Over Tax Reform

Kevin Glass
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Posted: Feb 15, 2015 11:29 AM
Beermakers Battle Over Tax Reform
There is a broad movement in Congress right now to give beermakers across the country a fairly large tax break. But there's also a pretty big fight over how large and what the best tax break policy is.

Competing bills are making their way through the legislature; the Small BREW Act and the Fair Beer Act. The former is backed by The Brewers Association, which represents small and craft breweries; while the latter is backed by the Beer Institute, which represents macrobreweries like Anheuser-Busch and MillerCoors.

So what's gotten everyone all frothy? Well, the BREW Act carves out microbreweries and domestic breweries, and doesn't extend the tax cut to all brewers. Under current law, "large brewers" - beer importers, and those that produce more than 2 million barrels per year - pay a $18 rate on all barrels. The universal rate tax stays the same in the BREW Act. What the BREW Act does is to cut taxes only for domestic breweries that produce less than 6 million barrels per year. For these small and medium-size brewers, there's a graduated rate up to 2 million barrels per year.

The Fair BEER act, on the other hand, installs a laddered rate for all breweries, large and small, foreign and domestic, and installs a 0% tax rate for the smallest brewers. This is actually a bigger tax cut for small and medium-size breweries than the BREW Act, but because it extends those tax cuts to the largest brewers as well, the craft beer industry is against it.

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The craft brewers are engaging in shameless economic protectionism in their rationale, as well. As Brewers Association President Bob Pease told the Center for Responsive Politics:

“I’m not sure why the Congress would be interested in providing federal excise tax relief for companies that are not making beer or producing any product in the United States,” Pease said. “All of the savings from the federal excise tax relief of the Small BREW Act would stay in the United States.”

Lower taxes on all beer would be a boon to all Americans. The Small BREW Act is a carve-out for small- and medium-sized domestic breweries. It's probably an improvement on the status quo, but the Fair BEER Act is more than an incremental improvement. It levels the playing field and doesn't give preferential tax treatment status to anyone.