Friday, July 9, 2010

Beeronomics: Taxes Again

Now the Beer Stimulus Bill is hitting the national media: this time the Wall Street Journal, under the tag "can beer stimulus hop up the economy?"  Ha, I like it when the WSJ gets clever.

Can microbreweries revive the economy? That’s the hope of Sen. John Kerry (D., Mass.) and a bipartisan group of senators who are pushing a plan to cut taxes on the nation’s legion of small brewers in hopes of stimulating hiring among craft brewers.

The plan, which was introduced by Sen. Kerry, would lower the per-barrel excise taxes on small breweries’ first two million barrels of beer per year (that’s 62 million gallons) and would triple the size of what the government classifies as a small brewer — to breweries that produce six million barrels a year from two million currently. Some co-sponsors include Sens. Olympia Snowe (R., Maine) and Ron Wyden (D., Ore.), whose states, not surprisingly, rank high on the list of states with the most breweries per capita (see chart below).

So-called craft brewers are one of the few industries to thrive through the recession. The segment grew from 7.2% by volume last year and 5.9% in 2008. The segment has even become a haven for budding entrepreneurs that have been let go from corporate jobs. “There’s not that many success stories in American manufacturing today and craft beer is one of them,” says Jim Koch, founder of The Boston Beer Co. which makes the various Samuel Adams beers. Mr. Koch — whose company is in Mr. Kerry’s home state — has been leading the charge for a lowering of the excise tax on small brewers.

Mr. Kerry’s office estimates that the tax decreases would free-up some $44 million — small potatoes in a $14 trillion economy — that the senator (presumably) hopes would be redirected toward new brewing tanks or hiring new workers. Sam Calagione, founder of Dogfish Head Craft Brewery in Delaware, says lower excise taxes would half his $750,000 federal tax bill. “It could be employees or capital equipment, but it would all go toward growing the company,” he says.

We do have one quibble. Mr. Kerry’s press release states that “Massachusetts started the small craft beer revolution,” but many other historians say that the current craft brew renaissance has its origins in Northern California, where San Francisco’s Anchor Brewing and the short-lived New Albion Co. kickstarted the movement in the ’60s and ’70s.

My main quibble is why is the assumption that any extra revenue would be reinvested and not taken as profit?  The idea that a tax break means more workers hired is silly.  The number of workers are the result of the optimal number needed to produce the beer demanded by the market.  I made this same argument when Measures 66 & 67 were being debated. In any case  here is the cool interactive chart:


Number of Brewers, by State

State   Total Brewers   State Residents per Brewer   
Alabama5932,380
Alaska1449,021
Arizona26250,007
Arkansas4713,848
California221166,320
Colorado10347,956
Connecticut16218,828
Delaware784,548
Florida39469,957
Georgia16605,359
Hawaii8161,025
Idaho1695,239
Illinois41314,672
Indiana28227,743
Iowa18166,809
Kansas17164,831
Kentucky7609,892
Louisiana41,102,699
Maine3142,466
Maryland21268,267
Massachusetts38170,999
Michigan70142,906
Minnesota22237,291
Mississippi12,938,618
Missouri29203,848
Montana2735,831
Nebraska15118,895
Nevada16162,510
New Hampshire1587,721
New Jersey18482,370
New Mexico16124,022
New York56348,041
North Carolina33279,467
North Dakota1641,481
Ohio42273,474
Oklahoma7520,337
Oregon9340,753
Pennsylvania75165,977
Rhode Island5210,158
South Carolina14319,986
South Dakota5160,839
Tennessee14443,921
Texas36675,749
Utah14195,459
Vermont1932,698
Virginia32242,784
Washington10065,492
Washington DC3291,031
West Virginia6302,411
Wisconsin6685,272
Wyoming1053,267