Alcohol

Last Year's Tax Cuts Are Yielding Gains for America's Brewers

Brewers are reinvesting more money back into their businesses as a result of last year's tax cuts.

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Tucked away in last year's otherwise polarizing and contentious tax cuts was a broadly bipartisan reduction in federal excise taxes for the nation's brewers, distillers, and winemakers.

Originally introduced as the wordy Craft Beverage Modernization and Tax Reform Act by the unlikely matchup of Sens. Ron Wyden (D-Ore.) and Roy Blunt (R-Mo.) in early 2017, this bill had managed to attract some 56 bipartisan co-sponsors in the Senate and another 303 co-sponsors in the House last year.

The bipartisan support did not survive it being folded into the very Republican Tax Cuts and Jobs Act, but what did survive were some steep rate reductions for alcohol producers.

Federal excise taxes on beer were essentially slashed in half, going from $7 per barrel to $3.50 per barrel for the first 60,000 barrels produced. That alone has had a big impact on the nation's smaller craft brewers.

"It's basically cut the federal excise tax in half and excise tax for a brewery in the beer business is substantial," says Adam Benesch, CEO of Baltimore-based Union Craft Brewing.

Benesch's company is set to produce some 12,000 barrels this year, meaning the changes to federal excise tax rate saved Union Brewing about $42,000, which he says was reinvested back into the business.

"The things we as growing, small brewers face is the cost of acquiring new kegs, hiring great people, making investments in our quality control lab. When we get a tax reduction like we did, those are the first things we looked at," Benesch tells Reason, saying that Union Brewing was able to upgrade his quality control equipment, hire new folks, and help their expansion into a larger facility they are sharing with other Baltimore manufacturers.

It's a similar story for Maryland's Flying Dog Brewery. CEO Jim Caruso (who is a donor to the Reason Foundation, which publishes this website) says the tax cuts might not look like much at the consumer level, but they free up a lot of money for businesses to reinvest in their operations.

"When you look at this reduction in taxes. That translates to a penny per bottle. It's a small cost per bottle times the number of cases, that adds up pretty quickly," says Caruso, saying his company saved some $300,000 thanks to the tax cuts, which he says has gone toward buying new capital equipment.

The same can be said for the tax cuts for craft distilleries, which saw the excise taxes on the first 100,000 proof gallons cut from $13.34 per proof gallon to $2.70. That sounds like a lot but adds up to about $2 off a fifth of whiskey.

That all this doesn't add up to huge savings for drinkers at the bar helps explain why one predicted negative side effect of the tax cuts hasn't come to pass.

When the tax cuts were first being proposed, a number of left-leaning outlets warned that a reduction in federal excise taxes would cause a spike in alcohol-related automobile deaths on the logic that cheaper booze would mean more drinking, and thus more drunk driving.

This reasoning was shaky at the time, and fortunately there's no evidence of a spike in drunk driving in 2018. Indeed, preliminary results from the National Safety Council show driving deaths from the first six months of 2018 are down slightly.

All told the tax cuts shaved some $142 million off the beer industry's $3.5 billion excise tax bill. Some $80 million of this is going toward small and independent brewers, notes Bob Pease of the Brewers Association, a trade association representing craft brewers.

The Brewers Association has collected surveys from members on what brewers have done with their savings. He says that hiring new workers, purchasing new equipment, and increasing philanthropic contributions were among the top results.

This is a big reason, says Pease, that the excise tax cuts—set to expire at the end of 2019—should be made permanent. "We have 7,000 breweries in the U.S. These men and women are taking this saving and reinvesting in the business, they're not pocketing the money."

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  1. the logic that cheaper booze would mean more drinking, and thus more drunk driving

    Sounds plausible but nope. The cause of drunk driving isn’t drinking but being irresponsible and self-destructive. And people feel better about themselves and others when goods are cheaper. They will show more self control and avoid bad decisions and make arrangements to keep everyone safe. Same is true for the drug war – increased prices for opiates actually increases crime, violence and suicide. Whereas in Portugal where drugs are decriminalized and relatively cheap, addiction and overdose have actually decreased.

    1. Forbidden fruit. American teenagers binge drink while kids in places where it isn’t illegal don’t have much of a problem.

    2. Is this the same mystical sockpuppet that was leading mobs with torches and pitchforks against Elon Musk puffing a joint in the other article?

  2. When the tax cuts were first being proposed, a number of left-leaning outlets warned that a reduction in federal excise taxes would cause a spike in alcohol-related automobile deaths on the logic that TRUMP DID IT.cheaper booze would mean more drinking, and thus more drunk driving.

  3. But leaving us with huge deficits. No thanks, Reason.

    1. Both teams increase the budget, but only one team does it in a way that the people who earn wealth get to keep it.

      I’d love to see a budget plan, but that’s something very few people care about

    2. I really like Christian. It’s sad that he will be fired for talking about the tax cuts in a vaguely positive way.

    3. See? It’s not kleptocracy looters squandering other people’s money taken at gunpoint. It’s the SHORTAGE of politicians and armed goons confiscating people’s assets. Thanks for setting us straight.

    4. “But leaving us with huge deficits. No thanks, Reason.”

      Can’t let you “tax cut=huge deficit” folks get away with this.
      This tax cut, as have others, have increased revenue to the federal government. It’s online, look it up.

      The problem is the spending, not the tax rates. The problem is social spending on autopilot that is breaking this country more than anything. Look up the expenditure pie chart produced by the IRS.

      Look it up. Find the real problem, not the political message.

  4. I thought tax cuts were just ” crumbs “.

  5. I am a knowledge seeker.
    I look for truths, even when those truths make me reconsider previously held biases or opinions.
    Most people however, engage in “Confirmation Bias”, that is, seeking only the info that reaffirms their biases and beliefs.

    That being said, BEWARE ANY SOURCE THAT PRESENT SKEWED, HIGHLY BIASED “INFORMATION”.
    THUS IS MOST ALWAYS THE CASE AT REASON.

    Note in this article vague statements like:
    “The Brewers Association has collected surveys from members on what brewers have done with their savings. He says that hiring new workers, purchasing new equipment, and increasing philanthropic contributions were among the top results.”

    ? So, where is the link to the supposed results of this survey? WHY IS THIS NOT VERIFIABLE INFO?

    ? “…among the top results”? THAT CAN MEAN ANYTHING. THEY COULD HAVE MERELY BEEN WITHIN THE TOP 90 PERCENTILE….MEANING EVERYTHING BUT THE BOTTOM 10 PERCENT.

    Thus, this is all very potentially MISLEADING gibberish.

    1. Also, it’s interesting that the SUPPOSED “Free trade” and “Libertarian” Reason Foundation are supporting protectionist legislation.
      This special-interest law, as written, is being applied ONLY to domestic producers.

      American importers are currently EXCLUDED. As are foreign producers.
      THAT’S NOT FREE TRADE. THAT’S THE EXACT OPPOSITE.

      This is also another example of BUREAUCRATIC OVERSTEP.
      The CBP is deemed the party responsible for the collection of tax on imported alcohol products. And as such, the CBP is writing their own guidelines and policies on this legislation.

      Alexis de Tocqueville noted that:
      “The last thing abandoned by a party is its phraseology, because among political parties, as elsewhere, the
      vulgar make the language, and the vulgar abandon more easily the ideas that have been instilled into it than the
      words that it has learnt.”

      And thus is the case for the “Libertarian” party, and supposed “Libertarian” followers like Reason.

      They cling merely to phraseology (useless labels), whilst abandoning the very principles underlying those ideologies.

      PROTECTIONISM IS NOT FREE TRADE.

      1. Any reduction in state theft is a step in the right direction. And foreign brewers – who cares! MAGA! America first.

  6. “the changes to federal excise tax rate saved Union Brewing about $42,000”
    “…He says that hiring new workers….were among the top results.”

    How many workers can one hire at $42,000?

    And this figure is for one of the larger craft breweries.

    “Caruso….which he says [his tax savings] has gone toward buying new capital equipment.”

    So where are the supposed new jobs being created here?

    The article doesn’t actually mention a single brewer whom stated it planned on hiring more employees.

    ALSO,
    This tax break amounts to nothing but a reverse-tariff.
    HOW IS THIS FREE TRADE?

    This tax cut affects only DOMESTIC PRODUCERS.
    So Importers and foreign producers are excluded from this tax cut…….REVERSE TARIFF.

    THIS ARTICLE DEMONSTRATES WHAT TOTAL HYPOCRITES SUPPOSED LIBERTARIANS REALLY ARE.

    THIS WHOLE ARTICLE SEEMS NOTHING MORE THAN AN APPEASEMENT PIECE TO Jim Caruso, “who is a donor to the Reason Foundation”.

    So, “FREEDOM FOR ME BUT NOT FOR THEE?”

    THAT’S LIBERTARIANISM IN A NUTSHELL….DIRECTLY FROM THE NUTS MOUTHS.

    1. Leftists hate when Americans support Americans

  7. Tax cuts goes against the grain of our beloved, efficient, coherent and Marxist progressive tax ideals.
    The little people should not have any money unless our wise and kind socialist slavers say it is permissible.
    Isn’t it enough we toil away so our obvious betters can become richer off our sweat?
    Do you really think you really need that house you live in when a government ghetto is a superior living abode?
    Do you really need all that food, or should we emulate the wise policies that Comrade Maduro is going in his socialist utopia in Vennzuela?
    Why would you have a flat screen TV when you can volumes of Marxist thought to memorize and adhere to?
    Why take a vacation when you can spend your vacation days working in a sugar cane field in Cuba or experience the comforts of a gulag in North Korea?
    Our socialist slavers know what is best for us. So let’s surrender all our ill gotten gains to The State so it can improve our lives, our health, and our meanings by oppressing us even more.

    1. The best parts are the government monopolies on health insurance and college loans and mail delivery and all those licenses for workers. They really make us free!

  8. so, Trump not all bad?

  9. This is a sobering assessment of a tax cut.

  10. Ok, that started out weak, but the last two sentences brought it home. Not bad.

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