Beer Tax Cut Permanent; What it Means
Last night, Congress passed a $900 billion Covid relief bill in which Senators had a tucked in few extraneous goodies, including making permanent a beer tax cut passed three years ago:
Securing permanent federal excise tax recalibration for small brewers has been a top priority for the Brewers Association since 2009. The temporary lower rates were due to expire on December 31 unless Congress extended them or made them permanent. “Inclusion of the Craft Beverage Modernization and Tax Reform Act (CBMTRA) in the year-end legislation is the direct result of the hard work and efforts of the Brewers Association, state guilds, and our member breweries,” said Bob Pease, president and CEO, Brewers Association. “Thank you to everyone for a true community grassroots effort, and to our legislative champions in Congress.”
This has been a major initiative of the Brewers Association, and they’re crowing about it this morning. And while it will help small brewers, in the logic of congressional sausage-making big beer will actually receive the bulk of the break in absolute dollars.
Who Gets What?
The provisions of the legislation reduced the excise tax for breweries making less than 2 million barrels from $7 to $3.50 on the first 60,000 barrels of production, but, presumably to garner support from big beer, also reduced the tax from $18 to $16 on the first six million barrels of production for all breweries. The topline numbers make it look like this is unalloyed good news for small brewers, who only pay $1.75 on a keg of beer (a half-barrel), while big breweries have to shell out $8 a keg.
That’s quite a savings for the little guys, but when you look at the value of the entire cut, the vast majority goes to big brewers. Consider the actual value of the cuts per brewery.
Small brewery making 2,000 barrels of beer: $7,000 tax cut.
Large regional brewery making a million barrels: $2,090,000 tax cut
Large regional brewery making two million barrels: $4,090,000 tax cut
Large industrial brewery making more than six million barrels: $12,000,000 tax cut.
The Upshot
This isn’t to say it’s not a good deal for everyone. Crafting legislation that counts as a win-win and draws support from opposing factions is really hard to do. But it’s also worth understanding in its full context—this isn’t purely a small brewery tax cut.
Finally, recognize that the federal excise tax is a levy placed on top of regular federal taxes, regular state and local taxes, and state beer taxes. Recognize further that breweries are the ones taxed here, not distributors or retailers. Many people feel that taxes are warranted to offset the social malignancy of alcohol. But the excise taxes fall only on one segment of the beer industry, which is already more heavily-taxed than most industries. There are good and bad arguments for why these taxes should exist, but they’re extra taxes above what breweries already pay. The government didn’t just give breweries a sweetheart deal relative to, say, booksellers. They’re still paying a lot of taxes.