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Trump tax cut might keep the cost of craft beer down — or put it out of business

President Donald Trump’s Tax Cut and Jobs Act included the Craft Beverage Modernization and Tax Reform Act, which will cut taxes in half for craft beer brewers.
President Donald Trump’s Tax Cut and Jobs Act included the Craft Beverage Modernization and Tax Reform Act, which will cut taxes in half for craft beer brewers. Getty Images/iStockphoto

Craft beer brewers around the country raised a pint when President Donald Trump’s tax cut was signed into law last month.

That’s because the Tax Cuts and Jobs Act included a provision that would cut their taxes in half beginning this month.

For craft beer drinkers, the reduced taxes mean the price of small-batch beer won’t go up as production costs rise, several South Florida brewers said. Breweries can also reinvest the cash into making more beer or offering new brews.

But the tax breaks also save millions for the country’s biggest brewers, such as Anheuser-Busch, which continue to gobble up independent breweries. Still, craft brewers see it as a victory.

“The plan is to put this money back into brewing,” said Jose Mallea, owner of Doral’s Biscayne Bay Brewing and a board member of the Colorado-based Brewer’s Association, which has been lobbying Washington for years for this provision. Mallea is a longtime politico who ran Sen. Marco Rubio’s campaign in 2010.

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Jose Mallea, owner of Doral’s Biscayne Bay Brewing and a board member of the Colorado-based Brewers Association, worked to pass legislation to cut taxes for craft beer.

That political clout has increased as the number of craft breweries in the United States has skyrocketed. There were just over 1,500 breweries in 2009 but more than 5,200 in 2016, the last year for which statistics are available from the Brewer’s Association. Florida ranks sixth in the country in barrels of craft beer produced, and the number of breweries has grown from 45 in 2011 to 195 in 2016.

Brewers used that power to lobby Congress into writing the Craft Beverage Modernization and Tax Reform Act into the larger tax bill passed in December 2017. Instead of paying $7 a barrel, craft brewers who make less than 2 million barrels of beer a year — and most small craft breweries fall into that group — will pay $3.50 on the first 60,000 barrels they brew. The tax rate dropped from $18 to $16 for all others on the first 6 million barrels.

The savings would amount to more than $4.2 billion for the industry, according to Congress's Joint Committee on Taxation.

“The plan is to give some deserving people a raise and hire more good people. And we’ll use the tax savings to do that,” said Mike Halker, owner and founder of Due South Brewing in Boynton Beach, one of South Florida’s largest producers.

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Source: Brewers Association

The big brewers, however, also see a huge benefit.

Those brewing more than 6 million barrels of beer a year will see taxes drop from $18 a barrel to $16. And breweries that sell less than 6 million barrels a year will only see about $80 million of the $4.2 billion in savings.

That leads critics to believe larger producers will see most of the benefit. Due South, for instance, brewed about 5,200 barrels last year. Biscayne Bay brewed about 2,500. Meanwhile, Anheuser-Busch InBev, which makes Budweiser and Rolling Rock, among others, brewed more than 100 million. With the tax cut, Due South would have saved about $18,000 last year. InBev would have saved $12 million.

Beer and cheese pairing at Craft Beer Cartel in Fort Lauderdale during American Craft Beer Week, May 15-21, 2017.

“Sure, it’s going to save us some money, but it’s ... tailored to the guys brewing millions of barrels a year,” said Johnathan Wakefield, owner of Wynwood’s J. Wakefiled Brewing, which brewed about 4,000 barrels of beer last year. “It’s quite a good chunk of money when you’re making a lot of beer.”

Some analysts have speculated the tax cut could help the larger brewers continue to buy out smaller craft brands and undercut local breweries. Constellation Brands, which owns Corona, bought out Oakland Park-based Funky Buddha Brewing last year for what souces say was about $80 million. And Anheuser-Busch continues to expand its craft acquisitions, such as Chicago’s Goose Island beer, onto more local shelves alongside local brewers.

“I don’t think the consumer is going to see the benefit from the small producers,” said attorney Robert Lewis, whose practice LewisFox Law specializes in laws governing the alcohol industry in Florida. “But I do think it’s going to keep some craft breweries in business.”

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Mike Halker, owner of Due South Brewing in Boynton Beach, said a tax cut for craft breweries included in December’s federal tax cut will benefit his brewery. Handout

Breweries have become more than industrial operations, making their once-bare tasting rooms into tourist destinations. Due South recently renovated its warehouse, once a Spartan space without air conditioning, into a vast tasting room that its owners hope will draw more visitors. The tax cut will help fund that growth, Halker said.

“When the costs go up, we can’t compensate by raising our prices,” Halker said. “As we grow, we will make more beer, make more money and pay more taxes. And that’s good thing.”

Carlos Frías: 305-376-4624, @Carlos_Frias

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