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Microbreweries and beer giants tangle over one tax cut

3:33 PM, Dec 19, 2013   |    comments
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WASHINGTON -- Beer politics are getting frothy on Capitol Hill.

American microbreweries are asking Uncle Sam to cut their federal excise tax so they can grab more market share from Coors, Budweiser, Corona, Miller and other brands that have become household names.

The big beer makers, meanwhile, support proposals that would cut excise taxes for all brewers, regardless of size.

Both sides, which were once united, are polite enough to praise the products made by the other camp but disagree on how to reduce one type of tax that affects the price of beer.

Though neither side's proposals are likely to advance on their own, both camps want their ideas to be the ones Congress includes in a future overhaul the U.S. tax code.
Making the case for the nation's 2,700 the microbreweries is the House Small Brewers Caucus, founded in 2007 by Oregon Reps. Pete DeFazio, a Democrat, and Greg Walden, a Republican.

The 123 caucus members get together a couple of times a year to have barrels of bipartisan fun while sampling a range of handcrafted brews.

But the group is about more than just suds and smiles, DeFazio noted in a recent interview. It's also backing the Small Brew Act introduced in February by its Republican co-chairman, Pennsylvania Rep. Jim Gerlach. Similar measures died in two previous Congresses.

At issue is a tax that the federal government assesses on a few products like beer, wine and gasoline and gets included in the price. The excise tax on beer is $7 per barrel for the first 60,000 barrels and $18 per barrel on anything above that. A barrel is a standard unit of measure in the beverage industry and contains 31 gallons of beer.

The Small Brew Act, co-sponsored by 136 House members, would reduce the levies to $3.50 per barrel on the first 60,000 barrels of beer, and to $16 per barrel on 60,000 to 2 million barrels. The current $18 rate would be retained on production exceeding 2 million barrels, under the measure.

A companion Senate measure introduced by Sen. Ben Cardin, D-Md., has 35 co-sponsors.

The bills would also expand the definition of a small brewer. Since 1976, the Internal Revenue Service has classified small brewers as those making up to and including 2 million barrels a year. The Small Brew Act would raise that limit to 6 million barrels.
Most microbreweries produce fewer than 15,000 barrels -- or 465,000 gallons of beer -- a year.

DeFazio, a home brewer since the early 1990s, said microbreweries deserve the tax break because they offer a homegrown American product people are drinking more of. Neighborhood breweries, the biggest job creators in the industry, need federal help to expand and compete more effectively against big multinationals that control more than 90 percent of the U.S. beer market, he said.

"We want to grow craft breweries -- small, local businesses, some of which grow to be quite large," DeFazio said. "We are producing an all-American product, helping the trade balance and bringing good beer to the world."

The Small Brew Act has Democratic and Republican backing, he added, because "beer is the last bipartisan thing in Washington, D.C."

Bob Pease, chief operating officer of the Colorado-based Brewers Association, acknowledged that the Small Brew Act would disproportionately help his members. He argued that Congress shouldn't hesitate to back the one segment -- specialty beer -- that's growing in an otherwise flat beer market.

"It's good economic policy for the government to support an industry that has the wind on its back. We definitely are doing well in terms of growing our volume of the beer market. But craft brewers . . . only have 6.5 percent of the beer market," he said. "We don't dog (big beer makers) on quality, but we disagree with them on policy."

The two beer giants, Belgium-based Anheuser Busch-InBev, the maker of Budweiser, Corona, Beck's and Stella Artois, and Chicago-based MillerCoors, whose parent companies are headquartered in^ @Denver and England^,@ have put their political muscle behind legislation that would halve the excise tax for all brewers, regardless of size.

The BEER Act, introduced in May by Sen. Mark Udall, D-Colo., has eight co-sponsors. A House companion, filed by Iowa Republican Tom Latham, has 72 backers.

"The BEER Act is the only legislation that supports additional tax relief for the genuinely small brewer, but doesn't ask members of Congress to pick winners and losers either among the industry, or among beer drinkers," Chris Thorne, spokesman for the Beer Institute, said in a statement. "Any beer tax bill should be fair, comprehensive and equitable, and the only bill that meets that standard is the BEER Act."

Citizens for Tax Justice, a watchdog group, noted on its blog in May that the Small Beer Act would confer upon successful, mid-sized beer makers the same tax advantages as mom-and-pop brewers. The expanded definition of a small brewer would, for instance, include the Boston Beer Co., maker of the widely available Sam Adams -- not a brand people think of as a "micro" brew.

(KUSA-TV © 2013 Multimedia Holdings Corporation)

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