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Small Breweries And Distilleries Are Winning With The New Tax Plan


Now we're going to hear about another industry that benefits from this new tax law. Small craft breweries get a big tax cut. Lynne Weaver is the founder of Three Weavers Brewery in the Los Angeles area. Coincidentally, she also has a background in tax policy. She joins us now from the brewery. Welcome to the program.

LYNNE WEAVER: Thank you for having me.

SHAPIRO: Describe the change and how you'll be taxed under this new law.

WEAVER: The excise tax is based on a per-barrel production. So it's whatever we package and send out of our brewery. We pay $7 per barrel of beer. It ends up making up close to 15 to 20, sometimes even 25 percent of our total cost of our beer. So the reduction in that tax is going to be greatly beneficial to us because it reduces our overall cost of goods.

SHAPIRO: Reduction from $7 a barrel to about what?

WEAVER: The new reduction is down to $3.50 a barrel.

SHAPIRO: And that's only for breweries that produce less than a certain amount of beer. So the big brewers don't get as big of a cut, right?

WEAVER: That is correct.

SHAPIRO: So if the excise tax is basically cut in half for you, how much money will that mean for you in a typical year?

WEAVER: Next year when it's actually going to take place, our goal is to produce 10,000 barrels, so it's going to be quite a bit of money for us. It's going to be close to $21,000. That's a part-time person. It allows us to hire somebody else. It helps quite a bit.

SHAPIRO: You say it's enough money to hire a part-time person. Is that what you plan to do with the money?

WEAVER: Yeah. I think that for most small breweries, the area in which is the most fluid in needing capital is really in labor. Once you buy equipment, the equipment is pretty much what it is. You have the capital outlay. But to fill those tanks requires a person to be able to brew.

I think a lot of craft breweries have to stretch their staff because they just don't have the funds available to be able to bring on somebody else to alleviate the workload. But having, like, the additional funds from the excise tax reduction will allow us to be able to bring somebody else in.

SHAPIRO: Some people are critical of lawmakers choosing specific industries to benefit, choosing winners and losers. Obviously you have the advantage of being a winner here, but do you have any hesitation about certain industries getting a boost and other industries not?

WEAVER: Well, to be totally honest, the craft beer industry hasn't had a boost in a very long period of time. If you look at how long the excise tax has been around for, there has never been a change. It's always been at $7 a barrel for beer. So if anything, the craft beer industry has been at a disadvantage with this excise tax.

SHAPIRO: You say the craft beer industry has not had much relief lately, and yet it's done very well. Five years ago, there were about 2,000 craft brewers in the U.S. Last year, there were 5,000. It doesn't sound like an industry that needs a lot of tax relief.

WEAVER: Well, that's skewed. So the vast majority of the breweries that are opening today or even are open are probably 3,000 barrels or less in production and really service a very small community. So you can't really look at it in the sense of how many breweries are opening because it doesn't necessarily mean that all of them are yet profitable. So if anything, those smaller breweries really do need this tax break just to be able to continue supporting their communities, creating those jobs.

SHAPIRO: One principle of taxation is that you should have higher taxes on things that you want people to do less. That's why there are cigarette taxes and some places have soda taxes. By that rationale, could somebody argue that beer makers should be taxed more, not less?

WEAVER: We're talking now about vices - essentially vices and the excise tax or luxury taxes, right? Well, one of the things about craft beer - it's not just about beer. It's about what we provide within our communities, the job creation - all of those things. So if those are tied to what somebody considers a vice, then, you know, it's like, you've got to kind of balance those two items. And really, I really believe that it negates the negative side as long as we are always responsible.

SHAPIRO: Lynne Weaver is the founder of Three Weavers Brewery in Southern California. Thanks so much for joining us.

WEAVER: I appreciate it. Thank you.