Tuesday, October 4, 2011

Taxes and Beer: The BEER Act is in Trouble

Photo Credit: Ángel Franco/The New York Times
From The New York Times, an article suggesting that the tax break for brewers bill, now known as the BEER act is probably dead:

Mr. Boehner, along with fellow House leaders like Representative Eric Cantor of Virginia, Representative Kevin McCarthy of California and Mr. [Paul D.] Ryan, who is the party’s leading crusader for spending cuts, were co-sponsors of a 2009 version of the beer tax break bill, which has never passed. Known as the Brewer’s Employment and Excise Relief, or BEER Act, it would halve the excise taxes on the first 60,000 barrels of beer for small brewers.

Steve Hindy, owner of Brooklyn Brewery, said his company stood to save about $400,000 a year if the tax break was approved.

“The tax break would boost our financial situation and allow us to further expand our business,” he said. “We would be able to create more jobs.”

But the bill has stalled, and none of the four Republican leaders are now sponsoring it. But Bob Pease, chief operating officer of the beer industry group, the Brewers Association, in Boulder, Colo., said that Mr. Ryan’s staff had assured the organization in a private meeting that he would continue to support the bill.

Mr. Ryan’s spokesman, Kevin Seifert, said that the congressman had no plans to sponsor the beer tax break, but he did not address the Brewers Association’s assertion about Mr. Ryan’s private support. Mr. Ryan supports “letting individuals and entrepreneurs keep more of their hard-earned money,” Mr. Seifert said.

I have to say as much as I like craft beer, I never supported this. I don't like these specific and targeted tax breaks in general, but even if I did, why does craft brewing need a specific tax break, the craft beer industry is booming?


Little Dave said...

The very reason the craft beer industry needs a tax cut is BECAUSE its booming... The ever increasing demand for craft beer means we can selectively cut taxes to small breweries - those who have the market for expansion, but not the money. The built in craft beer market means guaranteed jobs in a successful industry, whereas tax cuts targeting less successful sectors mean more risk, and less potential for guaranteed growth and jobs. At least in my humble, money grubbing, brewer opinion....

Derrick Peterman said...

I have to agree that when you consider all the people that need a tax break, craft brewers are pretty far down the list.

Jeff Alworth said...

I don't think you're looking at this the right way. Breweries are assessed an excise tax over and above regular Federal, state, and local taxes. This would lower the additional tax they already pay. (We could launch into a debate about Pigouvian taxation and the costs of brewing, but my firm conviction is that this is purely a moralistic sin tax, not Pigouvian.)

As a stimulus, it's pretty sound logic. Craft breweries employ more people than major breweries because they're less efficient. Brewers would invest the savings into growing their businesses (they are in the rare industry able to do that), which would employ more people. It's not double bank-shot incentives, either; breweries have readily announced their intentions to expand if they could get the break.

Your reason--that carve-outs are bad public policy--is warranted in discussing structural policy changes. Using the rationalization in a system that is rife with carve-outs that leave some industries (financial, energy, farm) net beneficiaries of federal dollars (at worst, they're taxed at very low levels) doesn't make a whole lot of sense. It's like arguing that Warren Buffett should pay more taxes just because he thinks the tax code should change. Silly.