Washington was one of the states in which craft brewing was born. With over 200 small breweries it remains one of its cradles of civilization. The Governor’s proposed quadrupling of sales-based excise tax to small brewers will likely send our state’s small brewers the way of the Sumerians. Even the proposal by the House, to make things supposedly more equable by lowering taxes on large brewers while substantially raising them on small brewers, will cause fundamental damage to a growing industry.
A basic, statistical look at the debate over raising the rate of state excise tax on Washington’s small craft brewers.
•Big Beer (non-Craft beer, dominated by Anheuser-Busch InBev and SAB MillerCoors) employs around 25,000 people in the US. Many other employees live and work abroad, as these are multi-national companies.
•With approximately 6.5% of the domestic market by volume, craft breweries employ over 108,000 people nationwide, and around 3900 in the state of Washington.
•With over 200 breweries (as verified by LCB 211), Washington is second only to California among all the United States. There are approximately 2400 craft breweries in the US; of these, 1/12 of these are in Washington.
•Big Beer produced 159 million barrels of beer in the US in 2012; of this, about 3 million barrels were sold in Washington
•Washington craft brewers produced 294 thousand barrels in 2012. With overall craft at around 1 million barrels, or 25% of total beer sales in the state, our segment of total craft sales represents an in-state market share of approximately 8%.
Which is the better investment when it comes to jobs creation? With their advantages connected with both economies of scale and efficiency of labor, should the big breweries be paying the same rate of tax as our smallest brewers? Oh, and by the way, there are no big brewers in Washington. With the possible exception of Redhook (partially owned by Anheuser-Busch InBev), not a single person in Washington is employed by Big Beer. Is lowering the rate of tax on ¾ of the beer sold in our state, as some have proposed, while raising that of our state’s smallest entrepreneurs, going to even balance out?
Where the creation of jobs over time on the state level is concerned:
•3499 people were employed by craft brewers in Washington at the end of 2011; by the end of 2012 that number had risen to 3859, an increase of over 10%
•In one year, 360 jobs were created in a climate fostering the founding and expansion of small brewing businesses, while still paying one of the highest rate of brewers excise tax in the country.
•Further, breweries that operate pubs and tasting rooms pay their servers and kitchen staff (at least) the highest minimum wage in the country.
We hear from members of the Washington House of Representatives that the plan is to achieve “parity,” raising microbrewery tax rates $.15/ gallon instead of the Governor’s proposed $.50/gallon, while also lowering the proposed rate for the macros, thereby “equalizing” the rate of tax. Tell your friends and neighbors who work in small craft breweries why the House wants to lower the tax rate for multi-national corporations while raising it for in-state, locally owned small businesses? Our profits are reinvested in our local economy, including with barley and hop farmers within our own state; their profits go back to Belgium, Brazil, South Africa, and Canada (ABInBev, SABMiller, MolsonCoors, et al).
A tax hike of $.15/ gallon approximately doubles our tax rate. While this is better than the more than quadrupling proposed by the Governor (who has himself suggested that the complaints of small brewers regarding the advantages in the market enjoyed by large brewers are “overstated”) is favoring multi-national corporations over demonstrated at-home jobs growth really the message that the House, the Senate and the Governor want to send to Washingtonians, justifiably proud of the cultural and business successes embodied in our small craft brewers?
All our legislators claim to value the culture and entrepreneurial spirit of Washington’s small craft brewers, yet they propose a crippling, and unprecedented, tax increase that has not been adequately studied as to its longer term economic effect, both on the state budget and on our small brewers. By driving small producers out of the market, by incentivizing out-of-state sales with an in-state tax rate more than double that of the state (Alaska) closest to the Governor’s proposed level, by pulling a fast one on breweries who have already undertaken loans for recent expansion, our state government is taking solid steps toward ensuring that only passion will sustain what will remain of Washington’s craft brewing industry.
Head Brewer, and Co-Founder (1996)
Elysian Brewing Company