Nearly half of the cost of beer, over 40 percent, is the result of taxes. The federal and all 50 state governments assess targeted taxes on beer, which is borne by consumers in the form of higher prices. Fortunately, two bills were introduced last month in Congress to provide some needed relief: The Small BREW Act & The Fair BEER Act.
For those who don’t think the tax code should be used to pick winners and losers, the Fair BEER Act is the better of the two bills, as it reduces taxes for all breweries, while the Small BREW Act only applies to some breweries. Scroll down to read a recent column in Reuters by ATR’s Grover Norquist and Patrick Gleason that explains the differences between these two bills, along with similar efforts to reduce beer taxes at the state level:
Title: The most expensive ingredient in beer? It’s not hops, it’s taxes.
By: Grover G. Norquist & Patrick Gleason
Whether you like craft beer brewed in small batches or the mass-produced variety, the most costly ingredient that goes into every pint of beer in the United States is taxes. Between federal, state and local levies, taxes make up, on average, more than 40 percent of the cost of beer purchased in the United States. In an effort to reduce the excessive tax bite, two competing bills have been proposed this month on Capitol Hill, along with legislation at the state level.
One of the proposed bills, the Small BREW Act, would, if passed, provide targeted federal excise-tax cuts for beer made by domestic brewers, with tax relief based on volume. This bipartisan bill would change the definition of a small brewer.
The federal government now levies a $7 tax on each of the first 60,000 barrels produced by small brewers. After that, the tax spikes to $18 a barrel. Businesses not defined as small brewers — those that produce more than 2 million barrels annually — must pay the $18 federal tax on every barrel they make.
The proposed bill, however, would halve the tax for small brewers on the first 60,000 barrels to $3.50 a barrel and redefine a small brewer as a business producing fewer than 6 million barrels a year, as opposed to the current 2-million barrel standard.
Senators Ben Cardin (D-Md.) and Susan Collins (R-Maine) introduced this bill. It has 25 Senate sponsors from both parties.
A competing bill, the Fair BEER Act, would provide federal tax relief for brewers of all sizes that are headquartered both domestically and abroad. Brewers producing 7,143 barrels or less a year, which represents 90 percent of brewers — would be exempt from paying federal beer excise taxes.
Brewers who produce between 7,144 and 60,000 barrels would face a $3.50 a barrel excise tax. Production in excess of 60,000 and up to 2 million barrels would face a $16-a-barrel tax. An $18-a-barrel tax would apply to production beyond 2 million barrels.
This bill, introduced by Representatives Steve Womack (R-Ark.) and Ron Kind (D-Wis.) has 23 co-sponsors.
But not just lawmakers on Capitol Hill are looking to provide tax relief for beer drinkers. State legislators seek to reduce the excessive tax burden on suds. In addition to the federal excise tax, all 50 states apply punitive taxes on beer. Tennessee, for example, levies the highest excise tax on beer at $1.17 a gallon. Alaska comes in second, with a rate of $1.07 a gallon. Wyoming has the lowest beer excise tax, at $0.02 a gallon. Wisconsin and Missouri have the next lowest, at $0.06 a gallon.
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