How a proposed tax cut could impact craft breweries

It's an idea that actually has support from both Democrats and Republicans from Minnesota.
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U.S. Sen. Amy Klobuchar wants to help Minnesota's craft beer scene grow.

She paid a visit to Canal Park Brewing in Duluth Monday to talk about the beer industry, and how a proposal in Congress could help it expand locally – in turn helping the state's (and country's) economy.

One of the ideas in the proposal – which is called the Craft Beverage Modernization and Tax Reform Act of 2017 – is a tax cut. It would slash the excise tax per barrel rate in half (from $7 to $3.50) on the first 60,000 barrels of beer, and it would apply to breweries that make fewer than 2 million barrels annually. That's most of the craft breweries in the country.

Klobuchar, according to FOX 21, said we need to encourage small businesses such as small breweries, and that can be done by reducing federal taxes on those first 60,000 barrels.

Canal Park Brewing – and the majority of Minnesota's more than 100 craft breweries – make fewer than 60,000 barrels annually. So with this tax cut, breweries would be saving money on every barrel of beer.

What does that mean for you?

Well, taxes are a cost for a brewery. And higher costs in turn get passed on to you – the beer drinker.

The Beer Institute, a trade group that typically backs larger breweries, says on average about 40 percent of what Americans pay for a beer goes to federal, state, and local taxes.

If this large bill passes, it doesn't necessarily mean your beer will be cheaper. But it does mean breweries will have more money, and that could go to employees.

"It would behoove them to lower the tax so that each facility can better take care of their employees, the facility and help promote and bring more people to the communities," Rockie Kavajecz of Canal Park Brewery told KBJR 6.

In fact, if the legislation passes, the Brewers Association says just the "beer portion" of the proposal is expected to create an additional 9,000 jobs nationwide in the first 12-18 months.

The beer industry's direct economic impact in Minnesota was $2.546 billion in 2016, according to Beer Saves America and the Beer Institute. Nationally, the beer industry supports 2.23 million jobs and generates $350 billion for the U.S. economy, a news release says.

The proposal would also help other craft beverage makers, like distillers, cider makers and winemakers. And one of the items in the measure would change alcohol content limits on wine, meaning your wine could be boozier, Food & Wine said.

It has quite a bit of support

The measure, which was introduced (again) back in January, has the support of the Brewers Association (the national trade group representing small, independent brewers). The group says the proposal will foster "economic development and innovation in the industry."

A bunch of lawmakers from both sides of the aisle also like it. The Brewers Association said in June the proposal has support from 45 senators and 218 members of the House.

That includes other Minnesota lawmakers: Republican U.S. Reps. Erik Paulsen, Tom Emmer and Jason Lewis, plus Democrats Rick Nolan, Collin Peterson, Betty McCollum and Tim Walz.

“Small brewers are increasingly playing an important role in cities and towns across Minnesota and the country thanks to a growing appreciation for craft beverages,” Paulsen, who sponsored the House bill, said in a statement. “We should make sure these brewers aren’t burdened by out-of-date regulations and high excise taxes that make it difficult for them to grow their business and the local economy."

Klobuchar says the proposal could pass as part of broader tax reform this year, the Duluth News Tribune reports.

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