Beer Stimulus: Can Hops and Barley Create Jobs?

Crack a cold one and help save the economy?

That's what an unlikely pair of political allies believe could be the brew with a bill in Congress that would reduce taxes for small breweries and, they say, create new jobs.

Reps. Richard Neal, D-Mass., and Kevin Brady, R-Texas, are proposing a bipartisan bill that craft brewers have dubbed the "beer stimulus." It would reduce excise taxes for breweries producing less than 6 million barrels a year, in the hope that small-town brewers could fatten their balance sheets and hire more workers.

One of brewers' bigger expenses is excise tax imposed on spirits and tobacco, first imposed in the 18th century to pay off debt from the Revolutionary War. Excise tax on beer, like other spirits, is paid per barrel produced and can be quite costly to smaller producers. The proposed legislation would drop the tax from $7 to $3.50 per barrel on the first 60,000 barrels for small brewers.

Rob Tod, owner of Allagash Brewery in Portland, Maine, said excise tax is one of his biggest financial outlays.

"Just to give you an idea of the burden we have in paying excise taxes: We employee 25 people ... and this year we'll pay over $150,000 in excise taxes," Tod said. "Whether we make or lose money we have to pay these excise taxes, and it's a burden that other small businesses don't have."

According to an estimate in a Harvard University study, reducing the excise tax would create more than 2,700 new jobs in the first year to 18 months and an average of 375 new jobs per year over the following four years.

Brady, the co-author of the bill, said although it isn't a priority for Congress to do, it is a serious bill that could create a lot of jobs.

"I know, considering we are fighting a war, the economy and the oil spill, this isn't the top of Congress' agenda, but this is a chance to increase jobs," Brady said. "Beer has gone global. We have these small craft brewers that can bring amazing new tastes in the market."

Big Beer Dominating Industry

Craft brewing has been a growing U.S. trend in recent decades.

"Craft beer is uniquely American because most Americans live within 10 miles of a brewery," said Kim Jordan, president of New Belgium Brewing Company in Ft. Collins, Colo. "So it's very local. People can go to their local brew pub or brewery and purchase beers that are made by people who are their neighbors and their friends."

The craft brewing industry competes with massive companies such as MillerCoors and Anheuser-Busch Inbev, which control a majority of the beer industry and have better financial backing to advertise and distribute their products, beer industry experts say.

"Today, the two top layers in the beer market, which are global companies, control more than 90 percent of the beer production," Neal, the bill's co-sponsor, said on the House floor. "Clearly, we need to do more to foster and promote growth for these small independent American brewers."

The Beer Institute, a lobby group that represents the larger breweries like Anheuser-Busch Inbev, says although it supports a different excise tax bill, it welcomes some changes to the beer excise tax structure that will help reduce the tax burden on manufacturers.

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