Saturday, March 12, 2011

Excise Tax to be Lowered on Beer

My brother sent me an article about a bill moving through congress that lowers the Federal Excise Tax on Beer.  The bill proposes to lower the excise tax from $7 to $3.50 on the first 60,000 barrels of beer and from $18 to $16 for bbl above the 60,000 threshold.  This is supposed to help small breweries compete against the larger ones.

Understanding that production brewing is a volume game with thinner margins, I fail to see the real benefit to truly small breweries.  Small breweries, however, are defined as those that brew less than 6 million barrels per year.  That is small only compared to the big three (Bud, Miller, Coors) who are in the 100 million barrel range.  For a small brewery selling what they make over their own bar, it is small potatoes.

Using my 1,000 barrel (31,000 gallons) theoretical brewery (see my Beer Math Post), which grosses me a nice cool $1,000,000 per year selling all of its beer across its own bar, it changes the dynamic by $3,500 or 0.35% per year.

I think that there isn't a great reason to compete against the large brewers.  Even Sierra Nevada and New Belgium aren't ever going to compete with those big brewers.  They are not going to start selling their six packs for a $0.10 less because they are saving that much...(it is about a dime per six pack).  They aren't going to get their production costs or materials costs down to the BMC level, even if they start producing similarly light beers, which let's hope they don't decide to do.  The lowering of the taxes will not drive up demand for their beers, either, and demand drives production and production would create jobs (in both construction and operations of breweries).

Lowering excise tax helps these extremely large "small" breweries, but it only helps them be more profitable.  And they are already profitable (look at their year over year performance for the last 5 years).  In this era of government budget cutting and service slashing, lowering taxes actually is doing more harm than good for this nation while doing literally nothing for most people, and helping a very small group of owners, stockholders, and executives of defined "small" and real large breweries alike.  It doesn't help a brewery open, start, or expand.

Maybe, just maybe, it will save a brewery that is in trouble.

No comments:

Post a Comment