Tax relief for brewers and beer importers will provide solid economic benefits
In order to provide comprehensive tax relief to America’s brewers and beer importers, Congress recently passed a temporary reduction in federal excise taxes on beer as part of the Tax Cuts and Jobs Act (TCJA), which President Trump signed into law in December 2017. This tax cut is good news for the beer industry as well as for the American economy because the new excise tax rates on beer may help make our industry stronger, more diverse, and more competitive.
We estimate that the beer industry will receive about $130 million per year in overall federal excise tax relief. This tax cut benefits the entire beer industry and better enables all brewers and importers to face its marketplace challenges. Beer is not just America’s most popular alcohol beverage, but it also provides more than 2.2 million American jobs and generates more than $350 billion in economic output – all while creating deeply memorable, celebratory moments in all of our lives.
Although every brewer and importer will receive some tax relief under TCJA, the majority of the beer volume will continue to be taxed at the same rate it was before the new law because beer’s tax rate changes are capped at six million barrels per company per year. That means that 73% of the beer volume sold in the U.S. will continue to be taxed at $18 per barrel – right where it has been since 1991. Large and regional beer suppliers, which jointly provide 58% of beer’s direct brewing jobs, will see their excise tax payments reduced by an average of 3%, while 99% of U.S. breweries’ excise tax payments will be reduced by 50%.
Importantly, small brewers will receive a significant share of the excise tax relief from under TCJA. The tax code defines a “small brewer” as one who produces fewer than two million barrels in a year. Today, these small brewers pay about 6% of beer’s federal excise tax payments, but they will receive about 46% of the industry’s excise tax relief from TCJA.
Small and large brewers as well as importers will be able to use their tax savings to pay off debts, upgrade their equipment and facilities, or hire new employees. The new law will enable brewers and importers to be even more competitive in the marketplace, and it should also encourage the creation of new brewery start-ups because it will lower the cost of doing business.
In fact, we estimate that the tax relief that brewers and importers receive under TCJA will lead to about $320 million in annual GDP growth and create jobs across dozens of industries – brewers, farmers, packaging and equipment manufacturers, accountants, marketers, salespeople, and even a few economists.
As of right now, these changes are set to expire in two years, but we at the Beer Institute plan to do everything that we can to convince lawmakers that this much-needed and beneficial tax relief should be renewed or even made permanent.