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The Brewers Association, a lobbying group for craft beer brewers, has been trying to make a case for a reduction in the federal excise tax on small U.S. craft brewers. The group supports legislation – the Small BREW Act – introduced earlier this year which would cut in half the excise tax on the first 60,000 cases of beer a craft brewer produces. Significantly, the bill would also quietly redefine what the federal tax code considers a “craft brewer” to include companies producing up to 6 million barrels of beer a year. (Right now, companies making less than 2 million barrels a year are eligible for an already-existing, smaller excise tax break on the first 60,000 barrels.) This would have the effect of giving beer tax breaks to some companies that few Americans would think of as “craft brewers.”
That would make the Boston Beer Company, maker of tasty brews under the Sam Adams label which enjoyed more than $95 million in US profits last year, a craft brewer and take a big bite out of its already low tax bill.
Over the past five years, the Boston Beer Company has claimed $22 million in tax breaks for executive stock options, has cut its taxes by $9 million using a federal tax break for “domestic manufacturing” and it has even enjoyed millions of dollars in federal research and development tax breaks. The company’s effective tax rate on its $330 million in US profits over the past five years has been just 23 percent, well below the 35 percent corporate income tax rate. And in 2008, while it reported $16 million in US profits it managed not to pay a dime in federal income taxes on that income. (In fact, the company reported receiving a tax rebate of $2 million from Uncle Sam that year.)
Boston Beer would become eligible for “craft brewer” tax breaks under the proposed bill (courtesy of the Congressional Small Brewers Caucus). While the Boston Beer Company is certainly smaller than the two multinational giants it competes against (Anheuser-Busch Inbev and SAB Miller), the company with the ubiquitous Sam Adams products enjoys profits on a scale that dwarfs the true craft breweries dotting the American landscape.
At a time when Congress and the Obama administration are critically examining many of the unwarranted tax breaks that have been purchased with lobbying dollars over the years, one has to ask: are new tax breaks for a mid-sized tax-avoider beer company high on our national “to-do” list?