WASHINGTON – U.S. Senators Ben Cardin (D-Md.) and Susan Collins (R-Maine), have teamed up to reintroduce their bill, S. 375, The Small Brewer Reinvestment and Expanding Workforce Act or Small BREW Act that will stimulate regional economies nationwide with a reduction in the excise tax on each barrel of beer brewed by small brewers. The bill also changes the threshold definition of a small brewer to better reflect modern production.
The Small BREW Act of 2015 would reduce the federal excise tax on every one of America’s small craft brewers. Under current federal law, brewers producing fewer than 2 million barrels annually pay $7 per barrel in federal excise taxes on the first 60,000 barrels they brew, and $18 per barrel on every additional barrel (one barrel = 31 gallons). Under the Small BREW Act, the rate would be $3.50 per barrel on the first 60,000 barrels. For production between 60,001 and 2 million barrels, the rate would be $16.00 per barrel. Then, the rate would be $18.00 per barrel. Breweries with annual production of 6 million or fewer barrels would qualify for these new tax rates.
“Small brewers have been anchors of local communities and America’s economy since the start of our history. In addition to making high-quality beers, Maryland craft brewers create jobs and reinvest their profits back into their local economies,” said Senator Cardin, Ranking Member of the Senate Small Business & Entrepreneurship Committee and a member of the Senate Finance Committee. “The federal government needs to be investing in industries that invest in America and create real jobs here at home. With more than 3,200 small and independent breweries currently operating in the US, now is the time to help this industry – and our economy — keep growing stronger.”
“Maine is home to dozens of unique craft breweries and brewpubs that invigorate our economy by providing more than 1,400 jobs and drawing countless tourists into our state,” Senator Collins said. “In meeting with brewers across Maine, they always make clear to me how federal tax policy affects their businesses. Our bill would help reduce the tax burden placed on many small brewers across our country, allowing them to thrive, create jobs, and further grow our economy.”
Joining as original cosponsors of the Small BREW Act are Senators Tammy Baldwin (D-Wis.), Thad Cochran (R-Miss.), Richard Blumenthal (D-Conn.), Mark Kirk (R-Ill.), Tom Carper (D-Del.), Lisa Murkowski (R-Alaska), Bob Casey (D-Penn.), Rob Portman (R-Ohio), Maria Cantwell (D-Wash.), Chris Coons (D-Del.), Martin Heinrich (D-N.M.), Mazie Hirono (D-Hawaii), Angus King (I-Maine), Patrick Leahy (D-Vt.), Ed Markey (D-Mass.), Bob Menendez (D-N.J.), Jeff Merkley (D-Ore.), Barbara A. Mikulski (D-Md.), Chris Murphy (D-Conn.), Bernie Sanders (I-Vt.), Charles Schumer (D-N.Y.), Ron Wyden (D-Ore.) and Amy Klobuchar (D-Minn.).
There are now more than 3,200 small and independent breweries in the United States, with approximately 1.5 more opening every day, according to the Brewers Association. Even though these small breweries represent about 12 percent of the U.S. beer industry in volume terms, they now represent the majority of jobs in beer. In 2013, craft breweries directly employed 110,273 people. They had a total economic impact of more than 360,000 full-time equivalent jobs generating more than $3 billion in wages and benefits; and paying more than $2.3 billion in business, personal and consumption taxes in towns and cities across America.
Because of differences in economies of scale, small brewers have higher costs for raw materials, production, packaging, and market entry compared to larger, well-established multinational competitors. Adjusting the excise tax rate would provide small brewers with an additional $65-$70 million each year they could use to start or expand their businesses on a local, regional, or national scale.
An economic impact study by then-Harvard University’s Dr. John Friedman (now at Brown University) found that the bill would generate $183.1 million in economic activity in the first year and almost $1.04 billion over five years and would also create nearly 5,230 jobs in just the first year. Maryland is home to 43 craft brewers, with at least 24 more in the planning stages. Maine has 36 craft brewers, with at least a dozen more in the planning stages.
The small brewer threshold and tax rate were established in 1976 and have never been updated. Since then, the largest multinational producer of beer has increased its annual production from 45 million barrels to 97 million barrels domestically and 325 million barrels globally. Raising the ceiling that defines small breweries from two million barrels to six million barrels more accurately reflects the intent of the original differentiation between large and small brewers in the U.S.