New European Beer Taxes Threaten to Derail the Recovery

Apparently the beer tax in Oregon is likely to once again be on the legislative agenda.  It is on the agenda of European lawmakers as well.  Now, a PriceWaterhouseCoopers study commissioned by The Brewers of Europe suggests that a new excise tax on beer would hurt European economies and threaten their recovery.  This study might come in handy for Oregon brewers as well as they try and prevent such legislation locally.

From Beernews:

The Brewers of Europe commissioned this study to quantify the impact of excise taxes on the overall tax collection, and employment and profitability in the brewing sector compared to other alcoholic beverages. Pierre-Olivier Bergeron, Secretary General, The Brewers of Europe said:

“The study provides strong evidence that arbitrary increases in excise tax would hit brewers – and the 1.8 million jobs created in the European hospitality sector generated by the brewing sector – hard just as the economy is striving to emerge from a deeply damaging recession. The study also shows that tax increases will ultimately NOT increase government revenues nor attain the expected levels.”

The study comes at a crucial time, with skyrocketing taxes on beer in some European countries as governments scramble to rake in cash. “At a time when regulators across Europe are looking at scenarios about taxation, we would urge them to give any plan a full economic reality check,” Pierre-Olivier Bergeron continued. “This study provides the data for sound judgments.”

A comparative cost analysis within the study shows that producers of alcoholic beverages constitute a significant industry within the EU, worth €242.5bn in 2007 in terms of sales. Sales of beer account for the highest proportion by value – €111.5bn or 46%. Beer contributed the highest amount of taxes to Member States across the EU and the lion’s share of jobs.

“This study shows that beer is the most expensive form of alcohol to produce,” observed Pierre-Olivier Bergeron. “So any move toward taxing all drinks based solely on alcohol content (‘unitary taxation’) would disadvantage a low alcohol beverage such as beer further in terms of cost of the product to the consumer.”

Taxes Again

Now the Beer Stimulus Bill is hitting the national media: this time the Wall Street Journal, under the tag "can beer stimulus hop up the economy?"  Ha, I like it when the WSJ gets clever.

Can microbreweries revive the economy? That’s the hope of Sen. John Kerry (D., Mass.) and a bipartisan group of senators who are pushing a plan to cut taxes on the nation’s legion of small brewers in hopes of stimulating hiring among craft brewers.

The plan, which was introduced by Sen. Kerry, would lower the per-barrel excise taxes on small breweries’ first two million barrels of beer per year (that’s 62 million gallons) and would triple the size of what the government classifies as a small brewer — to breweries that produce six million barrels a year from two million currently. Some co-sponsors include Sens. Olympia Snowe (R., Maine) and Ron Wyden (D., Ore.), whose states, not surprisingly, rank high on the list of states with the most breweries per capita (see chart below).

So-called craft brewers are one of the few industries to thrive through the recession. The segment grew from 7.2% by volume last year and 5.9% in 2008. The segment has even become a haven for budding entrepreneurs that have been let go from corporate jobs. “There’s not that many success stories in American manufacturing today and craft beer is one of them,” says Jim Koch, founder of The Boston Beer Co. which makes the various Samuel Adams beers. Mr. Koch — whose company is in Mr. Kerry’s home state — has been leading the charge for a lowering of the excise tax on small brewers.

Mr. Kerry’s office estimates that the tax decreases would free-up some $44 million — small potatoes in a $14 trillion economy — that the senator (presumably) hopes would be redirected toward new brewing tanks or hiring new workers. Sam Calagione, founder of Dogfish Head Craft Brewery in Delaware, says lower excise taxes would half his $750,000 federal tax bill. “It could be employees or capital equipment, but it would all go toward growing the company,” he says.

We do have one quibble. Mr. Kerry’s press release states that “Massachusetts started the small craft beer revolution,” but many other historians say that the current craft brew renaissance has its origins in Northern California, where San Francisco’s Anchor Brewing and the short-lived New Albion Co. kickstarted the movement in the ’60s and ’70s.

My main quibble is why is the assumption that any extra revenue would be reinvested and not taken as profit?  The idea that a tax break means more workers hired is silly.  The number of workers are the result of the optimal number needed to produce the beer demanded by the market.  I made this same argument when Measures 66 & 67 were being debated. In any case  here is the cool interactive chart:

Number of Brewers, by State

State	Total Brewers	State Residents per Brewer
Alabama	5	932,380
Alaska	14	49,021
Arizona	26	250,007
Arkansas	4	713,848
California	221	166,320
Colorado	103	47,956
Connecticut	16	218,828
Delaware	7	84,548
Florida	39	469,957
Georgia	16	605,359
Hawaii	8	161,025
Idaho	16	95,239
Illinois	41	314,672
Indiana	28	227,743
Iowa	18	166,809
Kansas	17	164,831
Kentucky	7	609,892
Louisiana	4	1,102,699
Maine	31	42,466
Maryland	21	268,267
Massachusetts	38	170,999
Michigan	70	142,906
Minnesota	22	237,291
Mississippi	1	2,938,618
Missouri	29	203,848
Montana	27	35,831
Nebraska	15	118,895
Nevada	16	162,510
New Hampshire	15	87,721
New Jersey	18	482,370
New Mexico	16	124,022
New York	56	348,041
North Carolina	33	279,467
North Dakota	1	641,481
Ohio	42	273,474
Oklahoma	7	520,337
Oregon	93	40,753
Pennsylvania	75	165,977
Rhode Island	5	210,158
South Carolina	14	319,986
South Dakota	5	160,839
Tennessee	14	443,921
Texas	36	675,749
Utah	14	195,459
Vermont	19	32,698
Virginia	32	242,784
Washington	100	65,492
Washington DC	3	291,031
West Virginia	6	302,411
Wisconsin	66	85,272
Wyoming	10	53,267

Taxes

This was brought to my attention (with the comment "must be an election year"):

Beer-brewing in Oregon generates more than $2.3-billion every year. Senator Ron Wyden proposes a federal tax cut for small breweries in hopes of expanding the industry even more.

...

"The fact of the matter is...Oregon makes beer, and beer makes good paying jobs for our people," explains Oregon Senator Ron Wyden.

Senator Wyden is proposing a major break for small breweries: taxes on the first 60,000 barrels would be cut in half. Ninkasi expects to produce 32,000 barrels this year, so this tax cut would save them more than $100,000.

"We started with a very small pool of resources to build a brewery, so to reduce the amount of federal tax by half would be a third of that bottling line cost or three full-waged employees a year," says Jamie Floyd, Ninkasi Owner. "Those are pretty big significant additions to the brewery."

Oakshire Brewing doubled their production this year to 4,000 barrels and, as a fairly new business, could definitely use the tax break.

...

Ninkasi and Oakshire are 2 of 78 brewing companies around the state generating more than $2 billion a year. Senator Wyden says he sees the potential for the industry's future growth and more job opportunies as well.

"Obviously there is so much economic hurt in our state right now that I'm making my special focus those industries that we can really look at as having an opportunity to generate good paying positions and employment," concluded Wyden.

Senator Wyden says the tax cut proposal has bipartisan support. He hopes to pass the bill before the end of the year.

Death and Taxes and Beer

Well I am not dead, so I guess I had better turn in my tax forms. As I am not enjoying Bend and Mt. Bachelor as was the plan for this spring break and am instead dodging nasty germs that my sick kids are constantly releasing into the stale air of my house, I figured I might as well do my taxes. But now that they are done, my thoughts turn to beer. This begs the question, what is the best beer to have post-taxes? (And this year I don't owe any extra taxes so I don't have to go the malt liquor route to drown my sorrows, in fact I can be a bit profligate since I get a modest refund - permanent income hypothesis?, pah!)

Well, I had to go to the local Safeway for a prescription (see: sick kids, above) I figured I'd pick up some post-tax filing celebratory beer. Unfortunately, Safeway's beer selection is the worst in Portland, but I figured that among the many Widmer beers they sell would be the new 'Drifter' that I am eager to try. Nope. Dang.

But aha! Salvation. Of all random things they have a 22oz-er of Deschutes' hop bomb 'Hop Henge,' this is a perfect post-tax beer. A huge beer that will nuke your senses and rid you of that bad tax after-taste. I find 'Hop Henge' and the similar 'Hop Lava' from Double Mountain a wee bit much, yet I still enjoy them immensely and they are perfect for certain situations (and this is one). I love hops, but these are intentionally out-of-balance for the serious hop heads, so beware should you go looking for that perfect post-tax beer.

After my Hop Henge, all the nasty memories of the Form 1040, the Schedule A, the Form 2441, the Schedules SE and C-EZ and on and on and on fade away and my consciousness is transported to Bend - where I was supposed to be all along. Thanks Gary and the Deschutes crew! [BTW, be nice to my brother who is in the brewing program at UC Davis and going to be doing an internship with you in April]

So, what is your choice for your "Thank God I am Finished With My Taxes!" beer?