And Now a Word from Your Brewer……

Don't tax my Manny's.
Don’t tax my Manny’s.

 

When I first moved to Seattle, the very first beer that I had was a Manny’s Pale Ale. Georgetown Brewing was a baby at that time, yet today they continue to grow and add jobs to the Seattle area. Kudos.

Here is a word from their part-owner, Roger Bialous. I don’t need to add anything – it speaks for itself:

 

Beer tax in Washington State is a hot topic in certain circles these days. I co-own Georgetown Brewing Company in Seattle. I get a little hot about this topic. Making beer is how I make my living. It is how I support my family. It is how we pay our employees so they can support their families. This is personal for me. Because I did not want to overreact to what may simply be political posturing, I have taken some time before making a public comment on this issue.

 

 

 

Small brewers selling beer in WA pay $4.78 per barrel in state excise tax. Compared to neighboring states this put us on the high side. That is unfortunate, but it must be said, our state’s regulatory environment has done a lot to make it possible for small brewers to get started, survive, and even thrive here.  I try to mention that every time I give a brewery tour or speak about our brewery’s experience over our 10 years.  Our state made it legal for microbrewers to both brew and self distribute. Among other factors, this made it possible for breweries like Pyramid, Bert Grant’s, Redhook, and Hale’s, to create our industry here roughly 30 years ago.  Last year, in 2012, Washington brewers produced almost 294,000 barrels of beer.  Not bad.

 

 

 

Oregon got into this micro/craft beer thing about the same time WA did.  Breweries like Bridgeport, Rogue, Full Sail, Deschutes, and Widmer led the way. Oregon state beer excise tax is $2.48 per barrel.  That’s $2.30 less than WA.  That’s only 52% of WA’s tax. It is also true that Oregon craft brewers produced just over 764,000 barrels of beer in 2012, not including Craft Brew Alliance.  Yes, that is 260% of WA’s 2012 output.  Is Oregon dominating us in this industry, my industry, because of their lower excise tax?  I’m not an economist.  I can’t say for certain, but I’d place a pretty sizeable wager that their lower state excise tax isn’t hurting those guys.

 

 

 

Now some in our state government are working to increase our beer tax.  The governor’s budget proposal suggested raising it $15.50 per barrel to $20.28, more than quadrupling our tax rate.  Wow.  The Senate’s budget included no beer tax increase, which we very much appreciate.  The House’s budget came out with a $4.65 per barrel increase, which would take us to $9.43, nearly doubling our tax rate.   

 

 

 

To have some context for the house proposal, it is important to understand that in the old days, small brewers paid $4.78 per barrel and big brewers paid $8.08.  Then, three years ago, big brewers got hit with an additional $15.50 per barrel, bringing their total to $23.58. That is really high. Small brewers were mercifully exempted from this. To our credit, over that time (and the whole time, frankly) our industry has done nothing but create jobs and pump money back into our state’s economy buying hops from the Yakima valley and malt from Vancouver, and of course our employees spend their checks in the towns where they live.

 

 

 

That additional $15.50 is supposed to end this June, which is a big cash flow hit to our already cash strapped state government. I understand why the House doesn’t want to let the big brewer tax sunset, the McCleary v. State decision regarding funding basic education has put us on the hook for billions of dollars over a short time frame.  That our financial situation is so dire makes it all the more baffling that the House’s proposal to drop the big brewer tax from $15.50/bbl to $7.75 would cost the state about $25.2 millon per year and raising the small brewer tax by $4.65 would gain the state about $3.7 million.  That is a net loss of about $21.5 million per year…all while putting the squeeze on local businesses and jobs. 

 

 

 

I can not fathom why the House has proposed to do this, especially when if they did something as simple as lowering the big guys tax a little less, say from $15.50/barrel to $9.61 or so, they would still collect the $58 million they have budgeted from beer over the next two years, while giving the big multi-national corporations a 38% tax cut, and leaving small local brewers alone so we can keep on creating jobs in EVERY legislative district of our fine state.

 

 

 

I think it is fair to ask what the big multi-national corporate breweries do for us, the citizens of Washington State.  They don’t create a lot of jobs that wouldn’t otherwise be here.  They employ a handful of brand reps. They aren’t located here and don’t spend their profits here, nor do their employees, because they don’t have many employees here.  Will they move their companies and take all those jobs out of state if we don’t cut them a tax break?  No.  They can’t, because they aren’t located here and they don’t employ here in any meaningful way. Do they promote Washington and increase tourism like our breweries?  No.

 

 

 

Our company sells well over 90% of our production here in state.  We will feel any tax increase, just as every small brewery that sells beer in Washington will.  Everyone who enjoys beer made by small brewers here in our state will feel it, too.  And why?  Apparently, so multi-nationals can get a 50% tax cut instead of a 38% tax cut.

 

 

 

Please join us in our opposition of raising the small brewer beer tax.  Contact your elected officials in Olympia and ask them to care more about the small breweries in our state and the jobs they create in their own districts than for the multi-national corporations.  If they must continue the beer tax of three years ago in some form, ask that they please continue to exempt the small brewers.

 

 

 

Roger Bialous, co-owner

 

Georgetown Brewing Company

 

Seattle, WA

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House Democrats Anger Craft Brewers, Justified Responses Ensue

A Ballard beer fan?
A Ballard beer fan?

At a press conference today in Olympia, House Democrats disclosed their new tax proposal. The Governor’s insane proposal to raise the tax on microbreweries by $0.50 a gallon, was watered down to a proposed $0.15 hike. Better, not good.

 

The new proposal would raise the tax on Big Beer, but just a bit higher than what craft brewers are going to pay. At least they are on the right path, but Washington brewers are going to fight tooth and nail on any tax increase. I am with them. The industry is too young and too fragile. Furthermore, few industries passively invigorate others like the brewery industry does. Farming, hospitality, creative, and many other industries benefit greatly – in Washington state – from these businesses.

 

So the Washington Brewers Guild has responded, and so has the great Dick Cantwell of Elysian Brewing. Read each of their justified responses. But brace yourself for a tax increase, because legislators have finally proposed an incremental approach. It’s time to rally your consumers and get them in contact with their congress person.

 

Here is the Washington Brewers Guild’s response because I fear it will be removed from their site at some point since it was posted on the front page:

 

House Budget Proposal

 

Listening to the press conference was pretty astounding that Rep. Carlyle wanted to be fair by continuing the R&D tax break for the small of the small, but going ahead and raising taxes on microbreweries. Here is our response:

April 10, 2013

Washington is believed to have the second highest market share for craft beer in the nation. Below are some statistics on why maintaining the small brewer tax rate at its current level allows for continued jobs production. Production data sheds light on the debate about equalizing alcohol tax rates among producers.

The Big 3 (Anheuser-Busch InBev, MillerCoors) employ around 25,000 people in the nation. Craft brewers employ over 100,000 people with only 6% of the marketshare. Which is a better investment in jobs growth? The current excise tax level is working. Washington breweries employed 3,499 people at the end of Q4 2011. Breweries are growing, expanding production facilities and adding jobs. Why lower the tax rate for multi-national breweries while raising it for homegrown Washington microbreweries, thereby cutting off the potential for job growth in a locally-owned and operated industry?

Equality in alcohol taxation: Anheuser-Busch InBev produced 99 million barrels in 2012 with MillerCoors following at 59 million. Together, the Big 3 produced 158 million barrels. Washington craft brewers, combined, only produced 293,716 barrels. 158 million : 0.24 million. To suggest that craft beer be taxed at the same rate as the Big 3 is hard to understand when combined, we make up less than 0.19% of their annual production. There is nothing equal about our industries. They probably spill more beer on their floor than the volume of my brewery’s annual production (2,700 bbls). We are so insignificant compared to the amount of beer they produce; suggesting that there be tax equality between such a Goliath and an itty-bitty microbrewery is astounding. They have economies of scale that we can not even begin to comprehend.

Washington State’s total beer sales were 4,013,072 barrels in 2012. An estimated 1,000,000 barrels are attributed to craft beer. Washington State craft brewers produced 293,716 barrels. We cannot even produce 1/3 of the demand for craft beer in our state. Washington brewers need the ability to continue to grow our industry, add jobs, and re-invest our profits back into our communities.

Annual Production in Barrels

Big 3: WA Craft Brewers

158,000,000: 293,716

1: 0.0019

 

While an appreciated reduction, the current House proposal of a tax increase of $0.15/ gallon still almost doubles our tax rate. Is favoring multi-national corporations over at-home jobs growth really the message the Washington government wants to send to citizens of Washington?

Heather McClung

Schooner EXACT Brewing Company
Washington Brewers Guild President

 

 

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This Whole New Beer Tax Thing, Is Gross

Don't tax my keg.
Does a 4x tax make any sense at all?

I imagine that everyone in Washington has heard about the newly proposed beer tax raise. The proposal would rake brewers for 425% increases (up to $20.28 per barrel) in the current tax (from $4.78 per barrel) Wow, Mr. Governor, that much!?

I have often wondered why politicians seek the big score rather than making modest and reasonable increases. If Gov. Jay Inslee thought this was the way to prove that he understood small business – a platform he ran very hard – then yikes. If he was smart, he would have tried something incremental, but this is just nuts. A 425% increase of anything is business-changing, I don’t care what your business, success level, or profit margin.

The State of Washington is facing a big budget crisis and education has been the publicly acknowledged loser. Losing the stranglehold that the state had on liquor has apparently left the state low on short term funds for alcohol education and enforcement. But that is just a single component of the issue, and the Governor has looked to the, finally, growing beverage industry for help.

I have disagreed with the Brewer’s Guild in the past, but not here. This tax increase is a huge burden for brewers to stomach. The Guild has hit the nail on the head, citing that any tax increase needs to be broad-based and not industry-specific. I just hope that the Governor does not propose simply shifting the tax from the producer side (barrel tax) to the consumer side (sales tax on beer).

I am often perplexed why lawmakers see fit to curtail growth in an industry that can be uber-important to the public sentiment, culture and economy of a state. But this tax increase would quadruple what those brewers in Oregon are paying. Brewer flight is not out of the picture.

Read more about the tax increase at the Brewer’s Guild’s website. They have also issued this Letter of Opposition and a form letter for citizens to send to their congress person. Luckily, the Brewers Association has joined the fight.

Let us all hope that reason wins out in the end.

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