New “stimulus plan” brewing in Congress

It is actually less of a “stimulus” plan and more of a “get government out of the way and stop inhibiting growth” plan. A bi-partisan group of Senators led by John Kerry (D-Mass) introduced S. 3339 in mid-may, a bill that would, among other things, reduce the federal excise tax that small brewers must pay per barrel they produce.

For the congressmen and Senators selling this proposition, it probably wasn’t the brightest idea to associate the tax-cutting-proposal with the word “stimulus” which now evokes memories of massive taxpayer-funded bailouts to government favored businesses that probably should have failed years ago due to inefficiency and sheer ineptitude.

Unlike the auto, construction, and real estate industries, small brewers in the US have made great strides in the last decade despite heavy taxes, discriminatory regulations, layovers from prohibition, and a recession. Craft beer is more popular among US drinkers than ever before. Given the opportunity in a free market, small brewers could collectively take a large chunk of the market away from the monolithic “big beer” companies like Anheuser, Coors, Budweiser, etc. They could lower prices, increase production and distribution, hire more workers and contribute more in tax revenue. But there’s a built in disincentive for small brewers to grow–if they get too big they loose the one advantage they have over bigger brewers: the tax benefit.

So yes, cutting taxes will help small breweries stay afloat and grow, but it isn’t enough for true stimulation of the beverage industry. To create jobs, increase the number of small brewers, increase competition, and massively reduce the cost of purchasing beer, congress should eliminate the tax on beer.

Consider that brewers not only pay the federal excise tax, but also a state excise tax in addition to all the other fees and costs. In 2004 the Beer Institute estimated that taxes represented over 40% of the retail cost of beer. Imagine that! Without the tax burden on producers your craft brew would cost just $3.50 instead of $6, your Budweiser would cost $1.50 and a miller high life would only cost you your dignity (just kidding, I drink high life).

And for some states protecting the small brew business is especially vital. Take Oregon, for example, which has more microbreweries per capita than almost any other state. Small brewers alone provide the state with nearly 5,000 jobs and over $2 million in revenue. In fact Oregon has more small breweries. While some legislators hear those numbers and can only see ways to leech off that success (as I wrote about back in February 2009) it is good that other legislators seem to understand the principle that if you get government out of the way of business, there are more jobs, more money, and more stuff. Perhaps if they could just apply that logic to all other businesses, including big brewing companies, we’d be a lot better off.