Georgetown Brewing Speaks out about Beer Tax

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To see a list of all of our stories on the beer tax issue, click here.

Georgetown Brewing Company has released a statement about the proposed tax increase on craft breweries. Roger Bialous is a smart man and he knows the business of beer from the inside out. I urge you to take the time to read his message.

From Roger Bialous, co-founder and owner of Georgetown Brewing Company.

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 puts 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

Note: WA and OR barrelage numbers per Paul Gatza, Director, Brewers Association.

 

 

 

3 Responses to Georgetown Brewing Speaks out about Beer Tax
  1. Christian Jacobsen
    April 16, 2013 | 2:07 pm

    I’m a big huge hairy fan of Georgetown Brewing, and small brewers in general.

    This morning on KUOW I head Jay Inslee address the question, and his answer was that “small” breweries do not pay the $4.7/bottle tax that bigger breweries DO pay.

    The case he made was that this is not too much to ask of small brewers to contribute toward WA state education.

    Reading your press release above, I am having a hard time parsing what you wrote into an answer to his statement.

    Could you please help me understand why this $0.05/bottle tax should NOT be applied to small brewers as well as large ones?

    I appreciate it! This is an issue I want to understand better.

  2. Kendall Jones
    April 16, 2013 | 3:23 pm

    Oh how I wish I could put this into sound bites. To begin with: The Multinational Big Beer Companies absorbs this tax without even noticing it. They pay tax in all 50 states and far beyond, and therefore can balance it all out. Paying WA tax is a small drop in a very large bucket of the overall taxes they pay. WA breweries sell virtually all of their beer in WA. Therefore they pay the WA tax rate on virtually all the beer they produce. The WA tax rate is already very high. Big beer pays the high WA tax rate on a tiny percentage of the beer they produce.

    I hope you can see how that makes a huge difference. I hope you can understand why that puts a very heavy burden on our Washington breweries, which create an extraordinarily large number of jobs for businesses of their size. (BTW: Big Big beer is just the opposite.)

    I suggest you read Dick Cantwell’s statement, which talks more about this aspect of the tax.

    http://www.washingtonbeerblog.com/elysian-brewing-speaks-out-about-beer-tax/

    This is a complex issue and cannot be easily put into sound bites. At least not by amateurs like me.

  3. C A Willoughby
    April 17, 2013 | 6:24 am

    I am very concerned over this also. I am a microbrew lover, and see the difference in the taxes at the store in the retail cost of these crafted beers. It is true that I can purchase a micro from Oregon cheaper than most Washington brews. This is because ofvthe tax difference primarily. Brewers must take into account the barrel tax as part of the final cost and pass it onto the consumer, who pays tax at the register again. Washington polititians have very little business sense anymore, as many are “professional polititians” who have law and government majors. I have always believed in the sell more at a lower cost to the consumer, increase your business revenue. This is the same in taxes on those products. Tax less, consumer cost is less, sales increase, more tax revenue to the state. So, as I see it, common sense would be to lower the barrel tax, increase tax revenue by increased comsumer sales. This could eventually increase business, jobs, which increases spending and revenue in Washington communities. All of this will boost our economy which is good for all in Washington. Instead, our ambitious shortsighted polititians with no business sense see raise tax raise revenue is the best and easiest thing to do. In the longrun, this will damage our already damaged economy.