Beer and pretzels.

A Progressive Tax: Beer Economics

by Elaine Schwartz    •    Mar 30, 2013    •    319 Views

Artisanal beer makers are asking for a tax break.

Because typical craft brewers produce fewer than 15,000 barrels a year, they already have a lower tax rate than the larger firms. Currently, US beer brewers pay a $7 tax per barrel (31 gallons) for the first 60,000 they produce annually. Anything more, the tax for each barrel increases to $18. At 98.5 million barrels for 2011, Anheuser-Busch InBev’s tax rate was pretty much the $18.

Hoping to support craft brewers, legislators have proposed the Small BREW Act. If passed, the new law will lower the tax on each of the first 60,000 barrels to $3.50. For production between 60,000 and 2 million, the tax per barrel would be $16. And then above 2 million, the $18 rate remains. Because the proposed act extends the definition of a small brewer, moderately larger firms like the makers of Samuel Adams would benefit.

As economists, instead of beer, we could say that our story is about a progressive tax. Structured just like our income tax system where the more affluent pay a higher proportion of their income than those who earn less, beer maker tax rates are higher for the bigger producers.

Others though see the Small BREW Act through an entirely different economic lens. Rather than debating the fairness of progressive taxes, opponents of the act say the cost is too high for society because of the negative externalities of excessive drinking.

Sources and Resources: There is lots more to beer than drinking. For the economics, this NY Times article provides a thorough picture of craft beer maker lobbying for lower taxes in the US while this article from The Hill provides a fascinating account of why the big beer makers oppose the Small BREW Act. Meanwhile, described in this Bloomberg article, French beer makers are protesting a massive tax hike. And everywhere, for centuries increased beer consumption has reflected middle class status in developing nations. We look at more of these beer facts, here and here, at econlife.com.

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