The growth of craft beer as an industry has persuaded some
to take notice as to what "craft" brewing really means and its role
in the overall beer industry. While debates continue over craft v. crafty,
production levels salience on definitions and independent v. corporate brewing,
one issue has craft brewers seemingly debating each other, and that issue is
tax. More precisely, excise federal tax on the production
of beer, no matter if it's craft, independent, neither or both.
Basically the excise tax code is set up so that those breweries
who produce more beer are taxed more on the federal level. Right now, that
production level is 2 Million barrels per year (those producing such quantities
are taxed more per barrel than those producing less). On the ground, it currently means that all craft
breweries do not pay this extra tax, but large breweries (like SABMiller and
AB-InBev) fork over the money.
Yet, the growth of craft beer has pushed some breweries
closer to this 2 Million barrel level, and therefore more taxation. As such, or by coincidence, the Brewers
Association has altered/updated its definition
of craft brewery to include breweries producing up to 6 Million barrels per
year (among other stipulations).
Following this, there have been efforts to alter/update the tax
code. Without getting into details, the
new tax proposals seek to increase the production level to 6 Million barrels
per year before enduring the full excise tax of $18/barrel.
This has some people in an uproar (or at least
discomfort). Some claim that only a
handful of large craft breweries will benefit from this while most of the other
medium/small craft breweries will see little benefit, especially if the money
saved by the large breweries is spent on marketing--giving them a leg up on the
competition, which is the smaller breweries.
Are you following? It's a bit
complicated, so to summarize: Craft breweries are getting bigger. Getting
bigger means more excise tax. Change
definition of "bigger" to avoid this tax burden increase. Those
"bigger" breweries benefit most, while smaller breweries see little
gain. I think that's the gist of it.
This will be interesting to watch to see if a rift develops (or
grows) between the handful of big craft breweries (like Sam Adams, Sierra
Nevada, New Belgium , etc) and the more numerous small breweries (like Crooked
Stave, Lagunitas, Foothills). It will also be interesting to see how the
Brewers Association handles this disagreement.
It should be noted that the BA supports this new tax code, as well as a
majority of its member breweries. Consensus is difficult to achieve in any
industry, so we'll see how this situation develops, if at all. Sources predict that this new tax code will
not pass Congress.
It should also be noted that the main argument in favor of
this proposed tax code is job creation.
With the money saved from the discounted excise tax (from $7/barrel to
$3.50/barrel for production under 60,000 barrels), small breweries can
re-invest in their companies, hire more employees and build up their
neighborhoods.
