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This tax break's for you: U.S. Rep. Richard Neal files bill to help craft brewers

January 25, 2013
In The News

GREAT BARRINGTON — There's a new revolution brewing in Massachusetts whose battle cry may very well be, "Less taxation on small fermentations."

Flanked by a group of Bay State craft brewers at the Barrington Brewery on Thursday, U.S. Rep. Richard E. Neal, D-Springfield, announced his plan to reform the national tax rate on small brewing operations. Under Neal's proposed Small Brewer Reinvestment and Expanding Workforce Act, most craft breweries would receive a substantial tax break, allowing them to reinvest the money into expanding and creating jobs.

Neal, who was accompanied by large craft brewers such as Jim Koch, founder of Samuel Adams, as well as small, one-man operations such as Northampton's Tyler Guilmette of Brewmaster Jack, said the tax rate for brewers established in 1976 has not kept pace with the economic realities of the business, particularly the difference between large breweries and smaller local craft beer makers.

Under current law, a small brewer that produces fewer than 2 million barrels per year pays $7 per barrel on its first 60,000 barrels. If production exceeds 60,000 barrels, the per barrel tax jumps to $18, which is the same amount that the two largest industrial brewers pay on their production of more than 160 million barrels per year. The proposed Small Brewer Reinvestment and Expanding Workforce Act would cut the craft beer tax rate to $3.50 for production of the first 60,000 barrels and $16 after that.

The bill also proposes raising the ceiling to qualify for the small brewer rates from 2 million barrels to 6 million barrels.

"After a point, there is a disincentive for them to produce more," Neal said during an interview after the announcement. “So what I'm suggesting is that, although they only produce about six percent of the beer in the country, but because they are growing rapidly and having a huge economic impact on regional areas of the country, that their tax rates should be more competitive."

With about 2,300 small and independent craft brewers across the country, Neal said they play a vital role in a niche part of the economy. Although the average small business employs between 10 and 50 workers, craft brewing employs over 100,000 full-time and part-time workers and generates more than $3 billion in wages and benefits a year.

"A lot of these brewers don't even come close to the threshold, but we want to provide an incentive for them to produce more beer and thereby create more jobs," Neal said.

Neal noted that although small brewers only produce a small percentage of the beer sold nationwide, they have made key investments in communities across America. To support these small businesses and help spur Main Street job growth, he said, America’s small brewers need a recalibration of the excise tax that is more in line with today’s realities.

While the rate change may be a small one, it will make a big difference, according to an economic impact study by Dr. John Friedman, an economist at Harvard University. Friedman estimates that over five years, the proposed bill would generate nearly 4,400 jobs in the first year, with an average of 300 jobs in each subsequent year over 5 years.

In addition, the study estimates that the bill would generate roughly $153 million in economic activity in the first year and approximately $865 million over five years.


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