(As seen on WZZM TV 13) More and more often, campaigning politicians are making stops at small alcohol producers, recognizing their contribution to the nation’s economy.
In recent weeks, presidential hopefuls Hillary Clinton and Jeb Bush both made stops at breweries in New Hampshire and Arizona, respectively. Meanwhile, Sen. Gary Peters, D-Mich., made a stop at Grand Traverse Distillery in Traverse City.
The support doesn’t stop at visits, however. Several bills have been introduced in an effort to foster growth in the industries by cutting their federal tax burden.
In beer, there’s a battle brewing between the Brewers Association and The Beer Institute as they support separate bills. Both bills are bipartisan.
Michigan has the fifth-highest number of breweries in the country, with more than 150 supporting more than 7,000 jobs and a total economic impact of more than $608 million. None of the breweries produce more than 500,000 barrels, but both Kalamazoo’s Bell’s Brewery and Grand Rapids’ Founders Brewing Co. could creep near 1 million barrels by the end of the decade.
The Brewers Association, a not-for-profit trade association, supports the Small Brewer Reinvestment and Expanding Workforce Act, or Small BREW Act, which only affects breweries producing less than 6 million barrels of beer.
Six Michigan politicians also support the Small BREW Act, including Sen. Debbie Stabenow, D-Mich., and Peters.
“The Small BREW Act is a significant piece of bipartisan legislation that can have a real meaningful impact on America’s small and independent brewers,” said Bob Pease, CEO of the Brewers Association. “It would allow them to remain competitive against large multinational breweries, invest further in their breweries and create new employment opportunities in their communities.
“This is the boost both our small brewers and overall economy need,” said Pease.
The Beer Institute, the nation’s leading trade association representing brewers, beer importers and industry suppliers, is in favor of cuts for brewers of all sizes and supports the Fair Brewers Excise and Economic Relief Act of 2015, or Fair BEER Act, a graduated tax reform.
The Beer Institute said more than 40 percent of what consumers pay for beer ends up paying for local, state and federal taxes.
“This bill is important for reforming a hidden tax that most beer drinkers don’t even know they pay and because it removes barriers to industry growth,” said Jim McGreevy, president and CEO of the Beer Institute.
“The Fair BEER Act deserves support because it offers fair reform of the federal beer tax, but it reaches that reform without completely changing the industry structure.”
Currently, brewers of less than 2 million barrels pay $7 per barrel on the first 60,000 barrels produced and $18 on every barrel up to 2 million. Brewers producing more than 2 million barrels pay $18 per barrel across the board. The parity in current tax rates was formed following movements in the 1970s to help small brewers.
If enacted, the Small BREW Act would cut excise tax rates to $3.50 on the first 60,000 barrels and $16 for 2 million barrels or less. The cap for small brewers would increase to 6 million to include companies such as Boston Beer Co. — the makers of Sam Adams Boston Lager — which currently makes slightly more than 2.5 million barrels a year. All other brewers would pay the current $18 per barrel rate.
Peters was one of the co-sponsors who introduced the bipartisan legislation into the Senate.
“Michigan is home to some of the finest beers and breweries in America, and our brewing industry is emerging as a key sector of our state’s economy, supporting thousands of good-paying jobs in Michigan,” Peters said.
“I’m proud to support this bipartisan legislation that will help small breweries in Michigan and across the country sell their products and grow their businesses.”
The Fair BEER Act would eliminate excise taxes on brewers for the first 7,143 barrels, cut it to $3.50 for less than 60,000 barrels and $16 for fewer than 2 million barrels. Beyond 2 million barrels, producers would pay $18 per barrel.
More than 90 percent of brewers produce fewer than 7,143 barrels and would pay no excise taxes, according to The Beer Institute.
The Fair BEER Act would include relief for all brewers, including multi-national brewers such as AB InBev and MillerCoors, as well as importers such as Corona and Heineken, which the Brewers Association opposes.
“Our tax policies shouldn’t discourage the growth and continued success of an industry that supports jobs for more than 2 million Americans, and it shouldn’t pick the winners and losers in the market,” said Rep. Steve Womack, R-Ark., who co-introduced the bill.
“This comprehensive reform bill supports brewpubs, microbrewers, national craft brewers, major brewers and importers alike and encourages their entrepreneurial spirit, which is exactly the spirit we need to get America’s economic engine going again.”
According to a study by Brewers Association Chief Economist Bart Watson, the Small BREW Act would generate approximately 6,000 new jobs during the first 18 months and an average of 570 each year thereafter. The decrease in excise tax would cost the government $129.9 million over the next five years in lost tax revenue, but would increase economic activity by $1.21 billion in the same time period, according to Watson.
The Brewers Association points to the Fair BEER Act as supporting companies that have cut jobs in the United States and sent them overseas.
The Beer Institute thinks those companies should see relief, as well, as four companies pay almost 80 percent of the federal excise taxes on beer in the United States.
The combined economic impact of the nation’s brewers, retailers and supply chain partners of all sizes totaled more than $246.5 billion in 2012, according to the Beer Institute.
Beer isn’t the only liquid industry with tax cuts possibly on the way.
Peters was one of three U.S. senators to introduce a bipartisan bill to decrease federal excise tax on distilled spirits. The Distillery Excise Tax Reform Act would reduce the rate from $13.50 per proof gallon to $2.70 for the first 100,000 gallons of spirits produced per year.
With more than 40 distilleries in Michigan — the third-highest number in the country, Peters said the support is needed to ensure their survival. The legislation is aimed at helping the businesses create new jobs and focus on making the best product they can, rather than having to rush production to make a quicker profit.
“We need to ensure these local small businesses are able to get off the ground and grow their businesses,” he said. “Starting a distillery takes a lot of time, effort and capital, and the high excise tax on craft distilleries makes growing their business more difficult.”
Studies have shown the spirit industry could add up to $400 million to the state’s economy. Currently, more than 800,000 Americans are employed by the spirits industry.
A young distillery making 30,000 gallons of spirits could see a savings of $324,000 if the tax rate is reduced to $2.70.
Long Road Distillers, which opened last week as the only operating distillery in Grand Rapids, could use the savings on planned expansions, said co-founder Kyle Van Strien. He was unsure whether it would help the company to hire additional staff.
He said he and partner Jon O’Connor are happy to pay taxes, but this would help put distilleries on an even playing field in terms of taxes since spirits are still taxed as a “hangover from Prohibition.”
“It’s hard to say how much it will help us in the first year because we don’t know how much we’ll produce,” Van Strien said. “It is safe to say it will help us a great deal as it will help us expand more quickly and reinvest in our business.”