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Reuters/Juan Medina
Reforming booze.
CHEERS!

The US Congress finally found something it could agree on: craft beer

By Chase Purdy

The US Congress is poised to pass a measure that would reform how federal taxes are levied on the beer industry, making it cheaper for craft brewers to get their product to consumers.

It’s a sign that America’s two major political parties can still find common ground over a cold drink, something that has the beer industry applauding. This week (Sept. 26), enough lawmakers in both houses of Congress co-sponsored twin bills that would lower the excise tax on brewers large and small, for the first time in 40 years.

The growth in the number of craft brewers in America since the 1980s forced mammoth brewers such as Anheuser Busch-InBev to rethink how they appeal to consumers. It’s no longer enough for them to trot out an array of light beers. Now they have to offer an assortment of styles (think India pale ale and Trappist) to keep up with the creativity of smaller, craft brewers.

The decrease in the excise tax will make it easier for more craft brewers to enter the market, and again intensify the pressures faced by the biggest producers.

Excise taxes—sometimes thought of as a luxury tax—are typically paid when people make purchases on a specific goods, including beer and fuel, and are often included in the price of the product. Currently, the craft brewing industry claims a $7- to $18-a-barrel excise tax is slowing its ability to grow. Whether beer producers will pass the savings along to consumers remains to be seen.

If passed by Congress and signed by the president, the new law would:

  • Reduce the federal excise tax to $3.50 per barrel on the first 60,000 barrels for US brewers who produce fewer than 2 million barrels each year.
  • Reduce the federal excise tax to $16 per barrel on the first 6 million barrels for all other brewers and beer importers.

That kind of reduction would be a welcome change for established brewers and anyone looking to get into the business. The last reform was passed by Congress in 1978, when the federal excise tax on small brewers was cut to $7-a-barrel from $9. That decision contributed to an increase in craft brewers doing business, economists say.

According to some craft brewers, new brewers face still must navigate a maze of regulatory red tape laid out by the Alcohol and Tobacco Tax and Trade Bureau. That can include completing background checks on employees, on-site government inspections of equipment, completing a legal analysis of the brewing operation, and approving labels.

Not to be overlooked, craft brewers are also facing challenges from bigger beer companies such as Anheuser Busch-InBev, that have been buying up craft brewers and, in turn, gaining more control over regional distributors.