The Washington Brewers Guild Responds to the Beer Tax

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I encourage you to see our previous posts about this subject.

Today there was a press conference in Olympia. The budget plan was officially introduced. The press conference will soon be available online. You can watch the press conference online. fast forward to the 23:00 mark to hear Rep Reuven Carlyle’s comments on the beer tax.

A personal aside: I hurts my heart and earns my ire to hear these people laughing (as Governor Inslee did a couple weeks ago) when they are talking about a tax plan that would jeopardize people’s businesses and jobs.

Here is the Washington Brewers Guild official response to the press conference and the proposed tax increase.

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 : 0.24million. 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

6 Responses to The Washington Brewers Guild Responds to the Beer Tax
  1. Kendall Jones
    April 10, 2013 | 2:06 pm

    The WA Brewers Guild informs me that it will soon have updated job numbers. I suspect they will be substantially higher than the numbers quoted above for 2011.

  2. Adam
    April 10, 2013 | 3:14 pm

    Don’t forget that Washington is the 2nd largest producer of hops and that Washington’s craft breweries use many, MANY times more hops than the big 3. There’s plenty of stats and quotes from Washington’s hop farmers to this effect.

    When the beer is brewed locally using local ingredients and consumed locally (as much of Washington’s beer is), it reduces the carbon footprint because the ingredients and finished product aren’t shipped as far. (Although I’ll admit that micros’ brew houses are far less energy efficient.)

    Also don’t forget the incredible advantages that the Big 3 have in both distribution and at retail. Small breweries fight for shelf space while the big breweries pump out the same crap in every packaging type known to mankind to occupy a larger and larger percentage of the total and especially the prime shelf space (eye level and center) in the major supermarket chains.

    Their incestuous relationship with the large retailers also means that the only option for many regional brewers who want to go national is to sell part of their business to one of the big 3.

    Adam

  3. Adam
    April 10, 2013 | 3:26 pm

    The number of breweries that can be supported per person (brewery market saturation level) is primarily impacted by State and local laws.

    Washington and particularly the Seattle area have an incredibly high number of breweries per person and per square mile compared to most of the country, I fear that with a doubling of the tax on small brewers that we’ll quickly find that we’re simply over saturated.

    -This is akin to the dew point, if the air is already holding the maximum amount of water that it can hold and the temperature drops, that moisture will fall from the sky. PLEASE DON’T MAKE IT RAIN DEAD BREWERIES IN WASHINGTON!

    The market is thriving and healthy at the current regulatory and tax “temperature” but an increase in the tax rate that small breweries pay will certainly lower the dew point and result in reduced competition, choice and beer diversity for Washintonians; if it pushes us above 100% market saturation we will see local breweries fail and a knock-on effect to the other industries that sell to the brewing industry.

    This is an incredibly local industry that should be protected. -I’ll leave it to someone else to argue the cultural and tourism aspects.

    Adam

  4. Kendall Jones
    April 10, 2013 | 3:40 pm

    Adam. Washington is the number one producer of hops in the U.S. 75% of the annual U.S. crop comes from Yakima Valley. (The other 25% comes from the Willamette Valley, btw.) 25% of the annual world crop comes from Yakima Valley. And yes, the hop farming business is booming largely because of the craft beer business. That’s for certain.

    2/3 of the Washington craft beer market is being met by out of state breweries. Sounds like we need a lot more breweries before we reach saturation, especially since the number of craft beer drinkers continues to rise.

  5. Adam
    April 10, 2013 | 4:00 pm

    You are of course on the national scene, Kendall. I made an ambiguous reference, I know; I was speaking globally. (Where I believe we still stand one rung below Germany.)

    Do you believe that if Washington instantly increased craft beer production tomorrow by 33% that the consumption of out-of-state beer would decline? (That’s one of the best parts of beer; trying new beers!)

    I know we’re all supposed to keep pointing at the BA’s annual # of breweries chart and keep repeating the mantra that “home prices always rise”; ERR UMM.. I mean “the number of breweries always goes UP”, but we’ve had craft brewery bubbles before and it’s certainly not outside of the realm of possibility right now. I moved here 10 months ago and have seen the # of breweries within 10 miles of my house go from 8 to 12 and I know of two more that will be open before summer and at least one more planned within those 10 miles. (P.S. I live on the East Side; not Seattle proper and the population density is lower out here.)

    Picture an awareness campaign with an image of it literally raining “dead breweries”. Although from the Washington Brewers Guild’s FB page, I’d say it sounds like they’re already raising up the white flag in surrender on this. -Focusing on a retail tax on beer so that the cost is put on retail sales, consumers and equally impacts in-state and out-of-state produced beer. -It IS a beer producers-focused org and not a beer consumers-focused org, I guess…

    Is there currently a Washington Beer Consumer’s Union of any type?

    Adam

  6. Adam
    April 10, 2013 | 4:08 pm

    The COST of brewing equipment has also risen pretty significantly and the number of people starting breweries coming from completely different backgrounds with very little theoretical or practical knowledge or experience in brewing is quite astounding.

    I know of one soon-to-be micro/nano on the East Side who’s “brewer” has only brewed two all grain home brew batches but is marching on because brewing is where the easy money is! (There’s definitely some folks partying like it’s 1999, but I’m quickly becoming convinced that 2001 is just around the corner.)

    Adam