Beer brewers' hopes of tax overhaul wait on bigger fish to fry

WASHINGTON -- The beer industry, from the smallest craft brewers to the giant Anheuser-Bush InBev, is behind a long-awaited rewrite of the federal tax code on beer. More than half the members of the U.S. House have signed on as co-sponsors of a bipartisan bill to do that, and nearly half the U.S. Senate has put its name on that body's version.

So why hasn't it happened?

Like many other pieces of legislation in Washington during the first five months of Donald Trump's presidency, a few big pieces have to move first before anything like the beer bill can follow.

Primarily, that is health care overhaul and what it might do to taxes embedded in the Patient Protection and Affordable Care Act; Trump's ambitious infrastructure improvement package and the possible tax consequences there; and a comprehensive rewrite of the federal tax code itself, which Republicans have promised and are pushing as a way to lower taxes and stimulate the economy.

"Together, the three pillars of infrastructure, tax reform, and repeal and replace of Obamacare are key to reaching the president's goal of a booming and vibrant American economy, and the administration is going to continue to work every day to turn the president's promises into policies," White House press secretary Sean Spicer said recently.

Rank-and-file members, such as Rep. Mike Bost, R-Ill., say that while they are optimistic that some sort of tax-overhaul package can pass this Congress, the uncertainty of what that package could be is affecting specific remedies that members on both sides of the political aisle support.

"Why do other taxation when we are looking at changing the system?" said Bost, who has signed onto the House version of the beer-tax bill, describing the mood. "I do see a lot of that happening."

Meanwhile, the beer industry, which is also awaiting federal action on alleged aluminum dumping in the U.S. by Chinese manufacturers, is moving along in a climate of uncertainty.

"An outdated tax code is preventing the entire beer industry from reaching our full economic potential," said Doug Bailey, vice president of industry affairs for the Anheuser-Busch Cos., that division's top lobbyist here.

"Beer is responsible for generating $48.5 billion in tax revenue, with $5.4 billion alone in beer-specific excise taxes," said Bailey, who accompanied an iconic Budweiser Clydesdale at pregame ceremonies at the emotional Congressional Baseball Game earlier this month.

"We need this legislation to give all large and small brewers, importers and suppliers the relief they need to grow their operations to the benefit of the American economy," he said. "We'll continue to work with the rest of the industry to educate Congress about the urgent need to pass this legislation."

"This legislation" is supported by both the Beer Institute, which represents the big brewers, and the Brewers Association, which represents the craft-brew industry that has exploded over the past two decades.

The measure would maintain the federal excise tax of $18 per barrel on every barrel of beer over 6 million produced by a single brewer. It would reduce that tax to $16 a barrel for the first 6 million barrels while reducing the tax to $3.50 per barrel on the first 60,000 barrels produced by any brewer that makes under 2 million barrels of beer a year.

Jonathan Martin, president of the Arkansas Brewers Guild and co-owner and head brewer at Bubba Brews Brewing Co. in Bonnerdale, Ark., southwest of Hot Springs, said an Arkansas delegation representing the state's craft brewers visited Washington in April to show support of the tax cut. He said Arkansas' breweries were still quite small and they'd see the $7 in federal tax they typically pay reduced to $3.50 under the proposed measure.

"This allows us to put more capital into our operations and will help with job creation," Martin said.

Arkansas breweries produced 24,623 barrels in 2015, the most recent data available, up from 14,641 for the previous year. A barrel of beer holds 31 gallons. In the U.S., Arkansas ranked 46th in beer production for 2015, up from 48th in 2014, according to the Brewers Association trade group.

As of June, Arkansas has 16 active permits for microbrewery restaurants and 25 small brewery permits according to documents provided by Arkansas Alcoholic Beverage Control.

The intent of the tax reduction is to stimulate the small-producer sector and beer production in the U.S. while still maintaining revenue to the U.S. Treasury. The bill would also ease federal restrictions on ingredients that can be added to beer and allow small, independent brewers to collaborate on new beers by giving them the flexibility to transfer beer between breweries without federal tax consequences.

"This is an industry driven largely by small-business men and women, and the last thing Washington should do is get in the way," said Sen. Roy Blunt, R-Mo., when he and Sen. Ron Wyden, D-Ore., introduced the Senate version in January. "This bipartisan bill will help remove barriers to growth for brewers, distillers and winemakers, making it easier for them to create new jobs and bolster our state's economy."

Support for the bill shows how bipartisanship can work in Congress. The American beer industry claims to support 1.75 million jobs, contributing about $79 billion annually in wages and benefits and $263 billion overall to the U.S. economy. Supporters say that the tax structure around it needs to catch up with an industry that, until recently, was dominated by big brewers.

The bill's supporters say the tax rewrite would result in the creation of another 9,000 jobs in the first 12-18 months because of more beer-making activity.

"This bill recognizes the changes in the beer industry that have occurred over the last several decades and positively impacts brewers of all sizes," said Jim McGreevy, president and CEO of the Beer Institute.

Information for this article was contributed by John Magsam of the Arkansas Democrat-Gazette.

SundayMonday Business on 06/25/2017

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