Helping Small Businesses Brew Jobs And Economic Growth

As I travel throughout Maine, I am consistently impressed by the energy, imagination, and commitment of our small business community. From technology to the arts, Maine entrepreneurs are strengthening our economy and creating good jobs for the people of our State.

One of the exciting small-business growth sectors in Maine is craft brewing. Our State is now home to more than 60 breweries that produce more than 200 different varieties. Maine craft breweries employ more than 1,400 people in jobs that will stay right here in Maine, jobs are not going to be outsourced. These are small businesses in our communities that are hiring people and making a difference.

Maine beer is shipped around the country and, increasingly, overseas. It has developed a real following among connoisseurs who have come to appreciate Maine quality and craftsmanship. This, in turn, has led to new tourism opportunities as visitors are drawn to our State to sample our delicious craft beers.

The rise of craft brewing is not just a Maine phenomenon. Nationally, small and independent brewers employ more than 110,000 full and part-time employees, generating more than $3 billion in wages and benefits, and pay more than $2.3 billion in business, personal, and consumption taxes. Craft beer now captures about 12 percent of the total U.S. beer market, double the market share of just five years earlier.

Congress can help create an environment that encourages job creation. That is why I have introduced, along with Senator Ben Cardin of Maryland, the Small Brewer Reinvestment and Expanding Workforce Act, or Small BREW Act. My Maine colleague, Senator Angus King, is an original co-sponsor of our bipartisan legislation.

The bill’s title is more than just a clever acronym; it is a statement of what this legislation is all about. The Small BREW Act is a jobs bill, and those covered by the bill are small businesses, entrepreneurs who are taking risks and creating jobs in communities around our state and around the country.

Our bill offers a practical means to spur the creation of new jobs as well as great products in this growing industry by reducing the federal excise tax on small craft brewers. This reduction would free up capital so these small business owners can reinvest in their companies and create more jobs.

Under the current law, these small businesses pay $7 per barrel in federal excise tax on the first 60,000 barrels they brew and $18 per barrel on every barrel thereafter. The Small BREW Act would reduce these rates to $3.50 on the first 60,000 barrels and $16 for production between 60,000 and 2 million barrels. Thereafter, the rate would remain at $18 per barrel.

We know from an economic analysis that such a change would have a significant positive economic impact. A 2013 study by a professor then at Harvard’s Kennedy School of Government estimated that our bill would increase economic activity by $1 billion over 5 years, create more than 5,000 new jobs in the first year to 18 months after passage, and create approximately 400 new jobs annually thereafter.

This change is long overdue. The small brewer threshold and tax rate were established in 1976 and have never been updated. Since then, the largest multinational producer of beer has increased its annual production from 45 million barrels to 97 million barrels domestically and 325 million barrels globally. Raising the ceiling that defines small breweries from 2 million barrels to 6 million barrels more accurately reflects the intent of the original differentiation between large and small brewers in the U.S.

Because of differences in economies of scale, small brewers have higher costs for raw materials, production, packaging, and market entry compared to larger, well-established multinational competitors. Adjusting the excise tax rate would provide small brewers with an additional $65-$70 million each year they could use to start or expand their businesses on a local, regional, or national scale. As the craft beer industry grows, so too will demand for American-grown barley and hops, and American-made brewing, bottling, canning, and other equipment. In fact, I recently visited a family farm in Aroostook that is beginning to malt barley for the craft breweries throughout our State.

In meeting with brewers across Maine, they always make clear to me how federal tax policy affects their businesses. The Small BREW Act would help reduce the tax burden placed on many small brewers across our country, allowing them – along with farmers and equipment manufacturers -- to thrive, create jobs, and further grow our economy.