Washington proposes quadrupling craft beer taxes, Georgetown Brewing responds

Now that Tennessee has won the battle against its high taxes, the craft brewing industry turns its sights to Washington state where Governor Jay Inslee has proposed shoring up tax loopholes, which would more than quadruple taxes for nearly every brewery in the state.

From the Puget Sound Business Journal:

The brewing industry employs about 42,160 people in Washington and brings in about $4.3 billion to the state annually, according to a recent study by the National Beer Wholesalers Association and the Beer Institute. The industry paid approximately $946 million in state taxes in 2012, according to the study.

Breweries that produce fewer than 60,000 barrels per year have until now been getting a $15.50-per-barrel tax exemption on beer sold in Washington state. Inslee’s budget plan would eliminate that exemption, raising the tax for small brewers to $20.28 per barrel, from $4.78.

Needless to say, this has stirred concern in Washington’s craft brewing industry. Roger Bialous, co-owner of the Georgetown Brewing Co., based in Seattle, responded to the tax proposal in a public letter.

“The governor’s budget proposal suggested raising it $15.50 per barrel to $20.28, more than quadrupling our tax rate,” he wrote. “The Senate’s budget included no beer tax increase, which we very much appreciate. The House’s budget came out with a $4.65 per barrel increase, which would take us to $9.43, nearly doubling our tax rate.”

Bialous was quick to put his comments in context. He explained that in terms of the House of Representatives tax proposal, small brewers paid $4.78 per barrel and big brewers paid $8.08 in the past. Three years ago, big brewers got hit with an additional $15.50 per barrel, bringing their total to $23.58.

“That is really high. Small brewers were mercifully exempted from this,” he wrote. “To our credit, over that time, and the whole time, frankly, our industry has done nothing but create jobs and pump money back into our state’s economy buying hops from the Yakima valley and malt from Vancouver, and of course our employees spend their checks in the towns where they live.

“That additional $15.50 is supposed to end this June, which is a big cash flow hit to our already cash-strapped state government. I understand why the House doesn’t want to let the big brewer tax sunset, the McCleary v. State decision regarding funding basic education has put us on the hook for billions of dollars over a short time frame. That our financial situation is so dire makes it all the more baffling that the House’s proposal to drop the big brewer tax from $15.50/bbl to $7.75, which would cost the state about $25.2 million per year, and raise the small brewer tax by $4.65, would gain the state about $3.7 million. That is a net loss of about $21.5 million per year … all while putting the squeeze on local businesses and jobs.”

“The governor’s budget proposal suggested raising it $15.50 per barrel to $20.28, more than quadrupling our tax rate … The House’s budget came out with a $4.65 per barrel increase, which would take us to $9.43, nearly doubling our tax rate.” — Roger Bialous, co-owner of the Georgetown Brewing Co.Bialous appealed to all the support craft brewers have received from the state in the past — such as allowing microbrewers to brew and self-distribute. It grew the craft industry in Washington to include craft names like Pyramid, Yakima Brewing & Malting Co. (a.k.a. Grant’s Brewery Pub), Redhook, and Hale’s Ales and Brewpub. To Bialous it makes the tax proposals all the more perplexing.

“I think it is fair to ask what the big multinational corporate breweries do for us, the citizens of Washington State. They don’t create a lot of jobs that wouldn’t otherwise be here. They employ a handful of brand reps. They aren’t located here and don’t spend their profits here, nor do their employees, because they don’t have many employees here. Will they move their companies and take all those jobs out of state if we don’t cut them a tax break? No. They can’t because they aren’t located here, and they don’t employ here in any meaningful way. Do they promote Washington and increase tourism like our breweries? No.

“Our company sells well over 90 percent of our production here in state. We will feel any tax increase, just as every small brewery that sells beer in Washington will. Everyone who enjoys beer made by small brewers here in our state will feel it, too. And why? Apparently, so multinationals can get a 50 percent tax cut instead of a 38 percent tax cut.”

Bialous asked for the support of all interested parties to oppose the tax increase and urged people to contact their elected officials.

“Contact your elected officials in Olympia and ask them to care more about the small breweries in our state and the jobs they create in their own districts than for the multi national corporations,” he wrote. “If they must continue the beer tax of three years ago in some form, ask that they please continue to exempt the small brewers.”