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
Alabama	5	932,380
Alaska	14	49,021
Arizona	26	250,007
Arkansas	4	713,848
California	221	166,320
Colorado	103	47,956
Connecticut	16	218,828
Delaware	7	84,548
Florida	39	469,957
Georgia	16	605,359
Hawaii	8	161,025
Idaho	16	95,239
Illinois	41	314,672
Indiana	28	227,743
Iowa	18	166,809
Kansas	17	164,831
Kentucky	7	609,892
Louisiana	4	1,102,699
Maine	31	42,466
Maryland	21	268,267
Massachusetts	38	170,999
Michigan	70	142,906
Minnesota	22	237,291
Mississippi	1	2,938,618
Missouri	29	203,848
Montana	27	35,831
Nebraska	15	118,895
Nevada	16	162,510
New Hampshire	15	87,721
New Jersey	18	482,370
New Mexico	16	124,022
New York	56	348,041
North Carolina	33	279,467
North Dakota	1	641,481
Ohio	42	273,474
Oklahoma	7	520,337
Oregon	93	40,753
Pennsylvania	75	165,977
Rhode Island	5	210,158
South Carolina	14	319,986
South Dakota	5	160,839
Tennessee	14	443,921
Texas	36	675,749
Utah	14	195,459
Vermont	19	32,698
Virginia	32	242,784
Washington	100	65,492
Washington DC	3	291,031
West Virginia	6	302,411
Wisconsin	66	85,272
Wyoming	10	53,267