It looks like Congress is poised to give brewers a tax break — unless it, uh, punts.
Competing bills were introduced in Washington this month that would reduce the federal excise tax paid by brewers, but each bill creates bigger winners depending on brewery size.
The two bills — we’ll call them the Small BREW and Fair BEER acts and avoid the awkward buzzword salad that results in those acronyms — have much in common but differ in key ways. Small BREW excludes the biggest brewers from its tax cut, while Fair BEER brings in the macrobrewers but also eliminates the federal beer tax entirely for the smallest brewers.
Before we get into the nitty gritty, let’s bring this home — to the fridge, specifically.
Lucette Brewing Co. is a small Wisconsin brewery opened five years ago that is adding on to its brewery in Menomonie. Last year it made 2,200 barrels of beer, including Farmer’s Daughter blonde ale, Ride Again pale ale and higher-end Belgian-style ales. Co-founder Mike Wilson says the expansion will allow Lucette to eventually top out at 5,000 barrels, market willing, and boost its workforce to perhaps 15 from the current three full-timers and three part-timers. (Wilson himself still sells and delivers the beer in the Madison and Milwaukee markets.)
Lucette’s federal excise tax bill last year was about $15,000, with another $2,200 due to the state. That total would be about enough to pay for one of the 30-barrel fermenting tanks that are going into the brewery addition. Or a part-time brewery assistant. Or a good chunk of a new delivery van.
“Anytime we can reinvest in the company versus paying taxes, it enables growth,” Wilson said.
The Brewers Association, the craft beer industry group, says Small BREW will enable just that by focusing on the largest majority of the 3,200-plus American brewers. It points to sharp employment growth among its “Main Street” members while big corporate brewers have cut workforces.
Small BREW, which is co-sponsored by Democratic Sen. Tammy Baldwin and 25 other senators, would create two tiers of brewers for tax purposes. Small brewers would be those who make less than 6 million barrels a year, up from the current 2 million cap. They would pay $3.50 a barrel, half the current rate, on the first 60,000 barrels produced and $16 a barrel, $2 less than the current rate, on production up to 2 million barrels. The current $18 a barrel would remain in place for small brewers’ production over 2 million barrels and for every barrel produced by any brewery that makes more than 6 million barrels. That 6 million barrel figure is also the upper limit for a craft brewer under the Brewers Association definition.
Fair BEER — which has Reps. Ron Kind, D-La Crosse, and Gwen Moore, D-Milwaukee, as co-sponsors — would create a production-laddered approach to taxation. The first 7,143 barrels, regardless of a brewer’s overall size, would be tax-free. Barrels 7,144 to 60,000 would be taxed at $3.50, same as Small BREW and half the current rate. Barrels 60,001 to 2 million would be taxed $16 each, the same $2 cut as Small BREW. Tax on barrels above that threshold would remain unchanged at $18 per barrel.
The Beer Institute — which represents all brewers, including multinational giants Anheuser-Busch InBev and MillerCoors — says the Fair BEER legislation removes “barriers to growth” for all breweries and “encourages capital and workforce investment through simple, fair and broad reform.”
Beer Institute lobbyist Chris Thorne noted on Twitter and to The Daily Beast that breweries generally pass taxes on to customers, and those costs fall unduly on less well-off drinkers when they’re higher on lower-cost macrobrews. The federal beer tax works out to about 12 cents per six-pack on breweries that make less than 60,000 barrels — that’s all but the biggest craft brewers — but is about 33 cents for the same amount of Budweiser or Miller Lite.
And while Fair BEER has been painted broadly as the “big beer” bill in the media, including in that Daily Beast piece, that under-7,144 exemption is a very interesting carrot for the smallest brewers, which would include Wisconsin labels such as Door County Brewing, O’so and Titletown. For the biggest producers in that category, the change would mean an extra $50,000 a year, versus half that savings under Small BREW.
A detailed analysis of the two proposals by Seattle beer lawyer Danielle Teagarden shows how widely the impact of the bills varies depending on a brewery’s size. A brewer that makes 100,000 barrels a year — New Glarus Brewing passed that mark in 2011 — currently pays $1.14 million. Under Fair BEER that would drop to $825,000; under Small BREW the bill would be $850,000. At 6 million barrels, the savings difference between the two proposals remains relatively narrow, with the total savings from current rates about $5 million under both bills. But under Small BREW, the first barrel after 6 million costs the brewery all of those $5 million savings.
That’s a lot of money, but there’s much more at stake for the federal budget. The Brewers Association estimates its preferred Small BREW bill would eliminate $64 million in federal revenue, while Fair BEER would cost more than $150 million. The Beer Institute pegs Fair BEER’s cost at $113 million, based on 2013 production numbers, Thorne said.
That’s a lot to digest, isn’t it? Now let’s digest a beer.
Brewed by: Lucette Brewing, Menomonie
What it’s like: Slow Hand falls nicely between the brawny roastiness of Ale Asylum’s Big Slick and the creamy sweetness of a milk stout like Bell’s Double Cream Stout.
Where, how much: Lucette added Slow Hand to its year-round lineup last fall, and six-packs of the 16-ounce cans can be had for around $9 at most of Madison’s better bottle shops.
The beer: Slow Hand pours a tan head atop a beer that’s black and glints only mahogany highlights. Roasty and sweet malt aromas are present but not overwhelming, and the flavor nicely walks between those dark chocolate roast notes and a creamy sweetness that plays in the beer’s texture as well. It’s a nice, full-bodied beer that nevertheless is highly drinkable.
Booze factor: It strikes an imposing figure, but the 5.2 percent ABV is modest on the stout scale.
The buzz: Winter is always a good time for stouts, but I’ve been drinking even more of them than usual this year. There are so many good ones, and although I often gravitate toward the imperials or new-to-me versions of the style, Slow Hand is one of the few I’ve picked up more than once this winter. It’s hearty but smooth, sweet but roasty, a perfect companion to your favorite chocolate bar.
I like Lucette’s beer, and hopefully the brewery expansion’s opening — expected this June — will translate to more beer in Madison-area shops or perhaps more beers in its portfolio. Whether any future growth is assisted by tax relief remains to be seen.
Bottom line: 4 stars (out of five)