Federal Small Brewer Excise Tax Recalibration Legislation
The following material was developed to help educate members of Congress and staff about small brewers, their unique contributions and challenges, and to make the case for supporting excise tax recalibration legislation.
Strengthen Small Businesses and Preserve American Jobs:
The Brewers Association seeks to promote and protect small, independent American brewers, their craft beers and the community of brewing enthusiasts. The Brewers Association represents 2,350 small and independent brewers across the nation. America’s small and independent brewers include 112 brewing companies that produce between 15,000 and 6 million barrels of beer per year at their 290 breweries, 1,087 microbreweries that produce less than 15,000 barrels per year and 982 brewpubs (brewery restaurants) that sell 25% or more of their beer on site. By comparison, the largest brewer in America sells 99 million barrels per year domestically and over 300 million barrels worldwide.
Nationally, small and independent brewers employ approximately 108,440 full- and part-time employees and generate more than $3 billion in wages and benefits and pay more than $2.3 billion in business, personal and consumption taxes. These brewers are vital small businesses in communities across the country, typically employing 10 to 100 employees.
Consumer demand for the bold and innovative beers brewed by America's small brewers has grown significantly in recent years. But beer produced by small, independent brewers still represents only 12% of the beer sold nationwide. As small businesses, small brewers face many economic challenges. Because of differences in economies of scale, small brewers have higher costs for production, raw materials, packaging and market entry than larger, well-established multi-national competitors. Furthermore, efforts to increase state taxes for all brewers continue to threaten jobs and their economic stability.
To help strengthen American small businesses and preserve Main Street jobs, the Brewers Association supports legislation to recalibrate the federal beer excise tax rate for America's small brewers. As of August 2, 2013, 111 U.S. Representatives and 32 U.S. Senators have sponsored bipartisan legislation (H.R. 494 and S. 917) seeking a recalibration of the federal excise tax rate for small brewers. In the 112th Congress, 176 U.S. Representatives and 44 U.S. Senators supported bi-partisan legislation (H.R. 1236 and S. 534) seeking the same recalibration of the small brewer-excise tax rate.
- Currently, a small brewer that produces less than 2 million barrels of beer per year is eligible to pay $7.00 per barrel on the first 60,000 barrels produced each year. Adjusting this rate to $3.50 per barrel would provide approximately $28million per year (based on 2012 data) to help strengthen our nation's smallest brewers and support their efforts to maintain and generate jobs.
- Once production exceeds 60,000 barrels, a small brewer must pay the same $18 per barrel excise tax rate that the largest brewer pays at 99 million barrels. Adjusting the tax rate to $16 per barrel on beer production above 60,000 barrels up to 2 million barrels would provide small brewers with an additional $32 million per year (based on 2012 data) that would be used to support significant long-term investments and create jobs by growing their businesses on a regional or national scale.
- The small brewer tax rate was established in 1976 and has never been updated. Since then the annual production of America's largest brewery increased from about 45 million to 99 million barrels. The ceiling defining small breweries is 2 million barrels. We support raising this ceiling to 6 million barrels to more accurately reflect the intent of the original differentiation between large and small brewers in the U.S. Raising the ceiling to 6 million barrels would provide small brewers with an additional $11.6 million per year to help grow businesses and add jobs.
The Brewers Association urges you to support legislation to create a graduated beer excise tax rate of $3.50 and $16 for America's small brewers. An economic impact study by Dr. John Friedman of Harvard University on the excise tax and jobs creation legislation introduced in the 113th Congress found that the legislation would generate approximately $183.1 million in economic activity in the first year and $1.04 billion over five years. Net federal tax revenue would fall by $16.9 million in the first year and only $95.9 million over five years. The study concludes that over five years such a recalibration would generate 5,230 jobs in the first year and an average of 400 jobs in each of the subsequent years.