Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Thursday 09/27/12

Beer, Taxes and the Fiscal Cliff

One of concerns for the upcoming lame-duck session of Congress after the election is who will be the winners and losers in the debate over taxes and spending cuts. Will the farm bill have to give up more programs, or will certain industries lose their tax breaks? As someone explained to me last week, every trade association in Washington is going to pushing their case on taxes.

Enter the Beer Institute. The group held a panel Thursday on Capitol Hill for congressional staffers to discuss the economics of the industry, some polling about the average beer drinker, and a bit of information about the amount of taxes paid by the industry.

Specifically, brewers nationally pay $3.6 billion annually in federal excise taxes, or about $18 per barrel. The industry is concerned that Congress may consider raising the excise tax on beer as a possible offset to avoid budget cuts or keep a tax break for someone else.

"The reason for holding this forum now is the expected debate about taxes," said Joe McClain, president of the Beer Institute. McClain wanted to make it clear, "We pay more than our fair share of taxes."

Highlighting all of the taxes paid by the industry -- federal and state excise taxes, payroll taxes, income taxes and so on -- brewers and associated companies pay $44 billion annually. Adding up all of the taxes, they amount to as much as 45% of the cost of a beer. "Taxes are the most expensive ingredient in your beer."

Beer consumption declined in 2009, mainly as the unemployment rate rose for one of the biggest segment of beer drinkers, those young men ages 25-34. Consumption hasn't fully recovered.

I learned a great deal about the beer industry in a short time. The industry directly employs about 1.1 million people and indirectly employs another 700,000.

The last time the excise taxes on beer were increased was in 1991 when slew of tax increases were passed across an array of industries. Brewers are concerned about another possible scenario.

Beer also is responsible for about 31,000 acres of hops grown annually in the U.S., in Washington, Oregon and Idaho, producing about 65 million pounds. Anywhere from 60-70% of that hops production also is exported.

"It's a small industry but it's a vital industry because hops and beer go together," said Alex Barth, president of the John I. Haas Co., the largest hops producer in the country. "We do well when the brewing industry does well. If our customers don't have the sales volume, then we don't either."

Obviously, this is just one industry seeking to ensure it doesn't bear the brunt of a congressional answer to the fiscal cliff.

Holding such a forum during a congressional break may seem counterproductive, but the argument is that staffers who continue working through such breaks are generally bored so it is easy to grab their attention for an hour or so to hold such events.

Moreover, when the Beer Institute says it is holding a forum and a reception following it, well, that draws a crowd. The foyer of the Rayburn office building effectively turned into Club Rayburn, so much so there was a line of youthful staffers waiting to get in.

Stay thirsty my friends.

I can be found on Twitter @ChrisClaytonDTN.

Posted at 9:11PM CDT 09/27/12 by Chris Clayton
Comments (5)
Once again, Washington looking for more money. Cuts are going to be made someday, by people who are for America not by political hacks we have today. More more more is all this group knows and has known for 35 years. Repubicans and dumbicrats are one in same political money grabbers.
Posted by Frank Thomas at 7:04AM CDT 09/28/12
Washington looking for more money is nothing new...but now they have a LOT MORE guns!
Posted by Ric Ohge at 10:17AM CDT 09/28/12
Maybe the beer drinkers could get paid for not drinking beer!
Posted by Bonnie Dukowitz at 2:06PM CDT 09/28/12
Fewer beer drinkers are like fewer smokers, it's a good thing, tax them! The amount society loses from smoking and drinking is much higher then a few acres of hops and tobacco.
Posted by Jay Mcginnis at 6:47AM CDT 09/29/12
If one can stay off prescription meds. by having a smoke or beer, More power to em. I don't do either.
Posted by Bonnie Dukowitz at 6:50AM CDT 09/29/12
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