When the nation’s craft brewers came to Washington last week, their bigger competitors tried to take some fizz out of the party.
The Brewers Association, a trade group for 2,300 or so small beermakers, held its convention in the capital for the first time and sent hundreds of members to lobby for a bill that would cut their taxes.
The Beer Institute, which represents heavyweights like Anheuser-Busch InBev and MillerCoors, quickly declared its opposition to the Small BREW Act. (The acronym stands for Brewer Reinvestment and Expanding Workforce.)
“It becomes very difficult for them to pass a bill with the big brewers fighting them,” says Harry Schumacher, editor of Beer Business Daily. “The big brewers still have a lot of stroke on Capitol Hill.”
So, these days, do the little guys.
Dan Kopman, chief executive of the St. Louis Brewery, says last year’s version of Small BREW had nearly 200 co-sponsors in the House and nearly 50 in the Senate. The House Small Brewers Caucus claims 116 members.
Small BREW, Kopman says, is about jobs. St. Louis Brewery makes about 50,000 barrels of its Schlafly beers each year. It’s contemplating a major expansion, but if it goes above 60,000 barrels its tax rate would rise sharply.
Federal law defines small brewers as those making less than 2 million barrels a year. They pay a $7 excise tax on each of their first 60,000 barrels, and $18 a barrel above that. Large brewers like Anheuser-Busch pay the $18 rate on their entire output.
Small BREW would cut the lower-tier tax in half, to $3.50, and introduce a $16 rate on production between 60,000 and 2 million barrels.
That middle tier would make it easier for brands like Schlafly to expand. “The tax structure suits the really small and it suits the really big,” Kopman says. “One of the problems we have with public policy in general, it does a very poor job of promoting the growth of medium-sized businesses.”
Another provision of Small BREW, apparently the least palatable for the giant brewers, would define a small brewer as anyone making less than 6 million barrels a year. That would give Boston Beer, which makes the Samuel Adams brand, and D.G. Yuengling a tax break.
Chris Thorne, vice president of communications for the Beer Institute, says his group has an alternative proposal, not yet introduced in this year’s Congress, to halve excise taxes for large and small brewers alike. It’s called the BEER Act, for Brewer’s Employment and Excise Relief.
“The historical position of our industry is to seek tax relief for all beer drinkers,” Thorne says. “We don’t want to be in a position where we are asking Congress to pick winners and losers.”
Kopman, who serves on the Brewers Association’s government affairs committee, says the problem is that the BEER Act would cost the government $2 billion a year, a tough sell in the current budget environment. Small BREW’s cost is estimated at $67 million.
Kopman thinks there’s room for a compromise, and would welcome a dialogue with the Beer Institute. “We’re not looking to pick a fight,” he says.
Unfortunately, he has one, and asking Congress to referee an intra-industry spat is not usually a recipe for legislative success.