This post first appeared at Center for Responsive Politics.
(Photo: CK Golf Solutions/flickr CC 2.0)
Craft beer is everywhere, and while that may seem like a good thing for beer lovers, the giants of the industry aren’t thrilled. This isn’t just a bar fight, either — it’s a tension that often plays out on Capitol Hill. With a new Congress, the debate over Sierra Nevada v. Bud is fermenting anew — and the talk isn’t of hops, wild yeast, or malt. The subject is a different secret ingredient that the less perceptive beer enthusiast might not notice: taxes.
Craft beer is a massively expanding industry, and the leading producers are only small in a relative sense. Sierra Nevada, one of the larger microbreweries, produces one million barrels of its beer each year to stack annual receipts totaling $200 million. When the brewery’s iconic India Pale Ale was first made in 1978, there were less than 50 independent brewers in the United States. Today, more than three-and-a-half decades later, there are over 2,700 breweries, a third of which were started in the last five years, according to Forbes. Brewing is a $100 billion-a-year industry that is largely dominated by those companies that can afford Super Bowl ads with lost puppies, but the small brewers of the country make up an ever-expanding share of the market.
As with many industries, the way Congress chooses to tax the different types of players can make all the difference. According to supporters, the bills introduced so far this year are an attempt to write a tax code for the industry that allows for the continued growth of those small breweries. But the devil is in the details.
Thus, we have BREW v. BEER.
According to Bob Pease, the CEO of the Brewers Association, which supports the Small BREW Act, the Fair BEER Act takes away a competitive tax advantage in American markets for domestic brewers. The BEER Act extends tax relief to companies that have headquarters outside of the United States — like major companies Anheuser-Busch InBev and Heineken — and also foreign breweries that import beer into the United States, allowing the money from tax breaks to be taken out of the country. The Small BREW Act tax cuts are limited to domestic production.
“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.”
Pease said that over the last 30 years, microbreweries have added 110,000 jobs to the American economy, and 25,000 of those jobs are in manufacturing. The Small BREW Act, he said, would help these beermakers hire more and invest more in their expanding share of the market (currently at around 10 percent).
Aside from the tax changes for foreign-headquartered companies and importers, the bills are pretty similar.
Introduced Thursday in the House by Reps. Steve Womack (R-AR) and Ron Kind (D-WI), the Fair BEER Act has 22 cosponsors and would implement a four-tiered taxing system, according to a press release from the Beer Institute. Under the BEER Act, beer makers who produce up to 7,143 barrels a year wouldn’t pay a dime in excise taxes. From 7,144 to 60,000 barrels, a $3.50 per barrel tax would be imposed. There would be a $16 per barrel tax on production between 60,001 and two million barrels, and $18 on every barrel after that. The Small BREW Act, introduced by Sens. Ben Cardin (D-MD) and Susan Collins (R-ME), has 24 cosponsors and would impose similar tiers, except all barrels up to the 60,000 mark would be taxed at $3.50.
Currently, $7 per barrel is levied on all barrels up to 60,000, followed by $18 per barrel after that. The 7,143 mark, according to the Institute, covers 90 percent of all beer producers.
“Our tax policies shouldn’t discourage the growth and continued success of an industry that supports jobs for more than two million Americans, and it shouldn’t pick the winners and losers in the market,” Womack said in a press release. “This comprehensive reform bill supports brewpubs, microbrewers, national craft brewers, major brewers and importers alike and encourages their entrepreneurial spirit, which is exactly the spirit we need to get America’s economic engine going again.”
The BEER Act is supported by the Beer Institute, an association of beer makers that represents an assortment of breweries including industry giants like Anheuser-Busch and Miller-Coors, but also smaller breweries in notable craft brewing hotspots like Oregon’s Deschutes Brewery and New York City’s Brooklyn Brewery. The National Beer Wholesalers Association, in an email, also indicated support for the BEER Act, but not the BREW Act.
The National Beer Wholesaler’s Association “does not support the BREW Act because language in the bill could change the industry structure by creating a new, unrealistic definition of a small brewer. Increasing the standard in the Tax Code to include those producing as much as six million barrels of beer annually will only benefit a small number of the very largest of these brewers,” wrote Kathleen Joyce, the communications director for the association. “If Congress wishes to reform excise taxes for beer, it should do so in a way that reflects current government and industry classifications. The Fair BEER Act is alternative legislation that will allow Congress this option.”
The Beer Institute did not respond to phone calls requesting comment for this story.
The beer, wine and liquor industry was among the top 20 industry donors to the campaign committees and leadership PACs of both Womack and Kind in 2014. It’s 18th for Womack, who received $16,506 from the industry last cycle, and 14th for Kind, who received $47,741. The National Beer Wholesalers Association, and lobbyists employed by the group, made the list of top 20 contributors to the two lawmakers. Womack received $10,000 from the association’s PAC plus $1,500 from its lobbyists. Kind received $15,000 from the association, plus $3,921 from its lobbyists. The Wholesalers Association was the largest contributor from the beer, wine and liquor industry to candidates in 2014 with $3.14 million donated.
The beer, wine and liquor industry doesn’t make the top 20 industries list for Cardin or Collins, and none of the members of the industry made it into either politician’s top donors, either.
The Beer Institute did a fair amount of lobbying in 2013 and 2014. In both years, it spent more than $2.1 million lobbying on legislation that included past incarnations of the Small BREW Act as well as issues like keg theft. In 2012, it spent just $1.3 million on lobbying (the most the group had spent up to that date, and the second time it spent more than $1 million).
The Brewers Association, which first spent money on lobbying in 2008, boasts much smaller lobbying numbers. In 2014, the group spent $259,000 to lobby the federal government. Its biggest lobbying year to date was 2012, when it paid out $353,899. According to Pease, up until this year he and individual breweries have spearheaded the Association’s lobbying effort. The Brewers Association hired its first full time lobbyist in DC this year.
Anheuser-Busch Inbev has a lobbying profile bigger than both of those associations combined. The brewing company spent $3.8 million on lobbying in 2014. It mentioned the previous Small BREW Act 10 times in those reports.
The beer, wine and liquor industry as a whole spent $23.8 million on lobbying in 2014, a steadily climbing trend. Anheuser-Busch Inbev was second only to the Distilled Spirits Council, a liquor trade association, among companies or trade groups in the industry.
