Brewing up U.S. jobs

Small businesses are the economic engines that drive our nation. Take craft brewers, for instance. Although they may be small, these breweries provide a big economic boost for this country. The more than 2,800 craft breweries in the U.S. provide upwards of 110,000 jobs, generate more than $3 billion in wages and benefits, pay more than $2.3 billion in business, personal and consumption taxes and have a $34 billion economic impact on the country.
 
Like all small businesses, however, they are not immune to fiscal and competitive challenges, especially relative to their larger counterparts. Given differences in economies of scale, small brewers have significantly higher costs for production, raw materials, packaging and market entry than larger, well-established multi-national competitors. Furthermore, efforts to increase state taxes for all brewers continue to threaten jobs and their economic stability.
 

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“Small breweries face huge head wins in terms of access to market in an industry dominated by global players,” said Sam Calagione, president of Dogfish Head Craft Brewery in Milton, Delaware.  “But most small breweries also face great challenges in terms of access to capital.”
 
Craft brewers need a tax code that helps them to expand, allowing them to remain competitive in a marketplace that is dominated by two foreign owned entities, to protect existing jobs and to stimulate new employment opportunities.
 
The Small BREW Act, a bipartisan and bicameral bill, is under review in Congress and seeks to recalibrate the federal beer excise tax rate for America's small brewers. The legislation would reduce the small brewer tax rate on the first 60,000 barrels of production by 50 percent (from $7.00 to $3.50/barrel) and institute a new rate of $16.00 per barrel above 60,000 barrels up to 2 million barrels.
 
“If Congress is looking for ways to help small, Main Street American companies create jobs and foster economic development, the Small BREW Act addresses all of these concerns,” said Bill Butcher, founder of Port City Brewing Company in Alexandria, Virginia. “Our brewery has been growing at a rate of 40 percent over the past several years. Federal excise tax relief would allow me to further invest in my business and keep it growing—creating additional jobs and a having positive impact on the local and regional economy.”
 
A study by Harvard University professor Dr. John Friedman—who is now serving as Special Assistant to the President for Economic Policy within the National Economic Council in the White House—found that the Small BREW Act would generate approximately $157 million in economic activity in the first year and $883 million over five years. Additionally, over 5,000 jobs would be created in the first 12 to 18 months and an average of 300 jobs in each of the four subsequent years.
 
As Senator Ben Cardin (D-MD), lead sponsor of the bill, aptly stated: “The federal government needs to be investing in industries that invest in America and create real jobs here at home.”
 
The excise tax on small brewers has not been modified since its inception in 1976, a time when there were only 30 small brewers.
 
Simple and targeted, this tax relief will have a direct impact on the now 2,800 small, American-owned operating breweries, providing them with an additional $60 million per year that would be used to support significant long-term investments in their breweries. Every small brewer in America in every state in this country would receive relief and be empowered to grow and hire more employees, enabling them to meet the ever-increasing demand for craft beer—which will no doubt have reverberating implications for many other more industries. That means more jobs for brewers, manufacturers, hop and barley growers, tourism boards, restaurants, local brewpubs and beer shops.
 
“Small American manufacturing companies employing people in rural areas of this country are few and far between. Yet, there are many breweries in every rural, suburban and urban region of the country looking to grow, to add equipment and jobs,” added Calagione.  “The passing of the Small BREW Act would be a powerful shot of adrenaline to not only our industry but the entire U.S. economy.”
 
That’s an idea worth pouring over.

Bob Pease is Chief Operating Officer of the Brewers Association, the not-for-profit trade group dedicated to promoting and protecting America's small and independent craft brewers.