Washington D.C. – January 22,2017
There is much debate as to who will save on taxes under the new Tax Cut Bill hailed by the Trump Administration, there is no denying that alcohol producers will save. Within the massive Tax Cut Bill is Craft Beverage Modernization and Tax Reform Act 2017 (CBMTRA) which cuts the Federal Excise tax on beer 50%, from $7 to $3.50 a barrel on the first 60,000 barrels for domestic brewers who produce less than 2 million barrels a beer annually. The passage of the CBMTRA favors the wave of small brewers who are growing exponentially across the Nation, while keeping in tact the $18 per barrel Federal Excise Tax on large brewers who produce more than 6 million barrels a year.
Beer Association President and CEO Bob Pease called the passage of CBMTRA, “a monumental day for small and independent brewers”. The Bill’s passage comes after decades of attempts to lower the Federal Excise Tax on Beer which was doubled under President George H.W.Bush in 1990 from $9 a barrel to $18 for the large brewers.
Although the Tax Cut for breweries is being touted as a tax cut for small brewers, it provides a larger savings to the large brewers. Anheuser -Busch InBev will see a savings of approximately $12 Million Dollars annually, while the average small brewer will save $10,000, and midsize brewers will save $400,00. The Tax Cut was pushed by its sponsors as a stimulus for small brewers. Most have said it will enable them to buy more equipment and hire new workers, however, overall the biggest beneficiaries are the large brewers based on actual dollars saved.
Does the tax cut mean cheaper beer for consumers? Not necessarily, although it would allow a small cut per glass in the price of beer, there is no indication that the industry intends on cutting their profit margins. The Tax Cut was offered as an economic stimulus to grow the craft brewer industry. The question is, did the real small craft brewing industry need a tax cut. According to the Brewers Association, the number of small breweries skyrocketed from 1,653 in 2009 to 5,301 in 2016, with 2017 growth numbers expected to show another increase.
Trey Malone, an economist at Michigan State University, who studies the beer industry sees this “small brewery “tax cut as a gift to the large brewers. “These guys are going to make an extra amount of money, which is incredible. It’s one of the industries booming right now, anyway”
The overall savings for the industry is estimated by The Congressional Joint Committee at $4.2 Billion over 2 years. Brewers producing less than 60,000 barrels per year are in line to save an estimated $160 Million over 2 years. This means that a tremendous amount of the Tax Cut goes to the largest breweries, who like Anheuser -Busch InBev, are foreign owned breweries.
On the surface it appears that the Tax Cut is beneficial to the beer industry, however it may not be as beneficial to the small business brewer, it may be the largest corporate brewers who benefit the most.The largest brewers represent about 1% of all brewers, yet they will reap approximately 75% of the savings from this cut on the alcohol excise tax.
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