Lower taxes on craft beer? CT senators think it's a good idea

Connecticut’s two U.S. senators have introduced a bill designed to boost the American craft beer industry through lower taxes.

The Small BREW Act of 2015 would reduce the federal excise tax on every one of America’s small craft brewers. Among the bill’s main sponsors are U.S. Sens. Richard Blumenthal and Chris Murphy, both Democrats from Connecticut.

“By reducing the burden of the excise tax, Connecticut’s small breweries — like Two Roads in Stratford, and Thomas Hooker in Bloomfield — will be able to spend potentially millions more on developing their own small businesses, and strengthening our economy,” Blumenthal and Murphy said in a joint statement.

Lowering excise tax thresholds

Under current federal law, brewers producing fewer than 2 million barrels annually pay $7 per barrel in federal excise taxes on the first 60,000 barrels they brew, and $18 per barrel on every additional barrel (one barrel equals 31 gallons).

Under the proposed Small BREW Act, the rate would be $3.50 per barrel on the first 60,000 barrels. For production between 60,001 and 2 million barrels, the rate would be $16 per barrel. Then, the rate would be $18 per barrel.

Breweries with annual production of 6 million or fewer barrels would qualify for these new tax rates.

The small brewer threshold and tax rate were established in 1976, and have never been updated, according to a release by Blumenthal and Murphy.

Drivers of economic growth

Blumenthal and Murphy said small breweries are drivers of economic growth. “They have generated thousands of jobs in the state and across the country, and are boosting local economies,” the senators said.

“That’s why we should be doing everything we can to make it easier for them to continue to increase productivity, hire more workers, and invest in their local communities,” they said.

Small breweries and jobs

There are now more than 3,200 small and independent breweries in the United States, with from one to two more opening every day, according to the Brewers Association.

Even though these small breweries represent about 12% of the U.S. beer industry in volume terms, they now represent the majority of jobs in beer. In 2013, craft breweries directly employed 110,273 people.

They had a total economic impact of more than 360,000 full-time equivalent jobs, generating more than $3 billion in wages and benefits; and paying more than $2.3 billion in business, personal and consumption taxes in towns and cities across America.

Economies of scale

Because of differences in economies of scale, small brewers have higher costs for raw materials, production, packaging and market entry compared to larger, well-established multinational competitors, according to Blumenthal and Murphy.

Adjusting the excise tax rate would provide small brewers with an additional $65 million to $70 million each year they could use to start or expand their businesses on a local, regional or national scale, the two U.S. senators said.

An economic impact study by then-Harvard University’s John Friedman (now at Brown University) found that the Small BREW Act would generate $183.1 million in economic activity in the first year and almost $1.04 billion over five years, and also would create nearly 5,230 jobs in the first year.

—as edited by Brad Durrell for the Shelton Herald

Click below to see photos from the 2014 Hoptobfest craft beer event in Shelton:


Click below to see photos from the 2013 Hoptobfest craft beer event in Shelton: