While craft brewers will have lighter tax bills this year, that savings won’t be hoarded away – it’s being put to work.
Members of the Ohio Craft Brewers Association met with Sen. Rob Portman, R-Ohio, on Friday to discuss how they’re reinvesting in their businesses and people while also pushing to make permanent recent tax changes that are only for the next two years at this point.
“For it to be permanent, you have to show that it is working,” Portman told the group. “Show me how you’re using the money.”
The Craft Beverage Modernization and Tax Reform Act was part of the broader tax reform packaged passed by U.S. Congress late last year. It reduced the federal excise tax to $3.50 a barrel from $7 a barrel for the first 60,000 barrels of beer produced annually at U.S. breweries making less than 2 million barrels a year.
It also reduced the tax to $16 a barrel from $18 a barrel on the first 6 million barrels for all other brewers and importers. According to the national Brewers Association trade group, that could be savings of $80 million for its members.
To a person, each of the nine brewery representatives shared stories of business growth.
Larry Horwitz, co-owner and brewmaster at Four String Brewing Co., said his business expects to save about $40,000 this year because of the tax change.
“We invest where we live and work,” he said. “We are the blue collar workers in the neighborhood.”
The company has 42 employees, up from two at its start in 2012.
“It’s hard to overstate how dramatic this is to us,” said Bill Boor, CEO of Cleveland’s Great Lakes Brewing Co. “This really moves the needle.”
One goal there is to raise wages.
The meeting was held at Seventh Son Brewing Co., a timely visual representation of what’s happening in the industry. Seventh Son is in the midst of an expansion that will greatly increase the size and production capabilities at its 1101 N. 4th St. brewery in Italian Village. That means jobs beyond the brewery.
“Our bricks are from Hamilton Parker,” said co-owner Collin Castore. “These are Columbus crews, Columbus-based, Columbus jobs.”
He said they will be adding staff with the tax savings.
Mary MacDonald, executive director of the Ohio Craft Brewers Association, noted that Ohio had 58 craft breweries with 800 employees when she joined the trade group in 2013. That has grown to 267 breweries with 5,000 employees last year.
Other breweries in attendance included Rhinegeist Brewery in Cincinnati, which started with five workers not even five years ago and has 250 today and BrewDog USA, which employs 125 at its Canal Winchester brewery and restaurant, which opened last year.
Columbus Brewing Co. expanded to its production facility in 2016 and employment has grown from nine to 25.
“Each year, we look at what we can add,” said co-owner Eric Bean. “This act went straight to our staff.”
The company added IRAs with a company match and instituted a profit-sharing program, among other benefits in recent years.
Adam Benner, co-owner of Land-Grant Brewing Co., pointed out that breweries were early residents of communities including Franklinton in Columbus, Over-the-Rhine in Cincinnati and Ohio City in Cleveland – all of which have seen additional development.
Portman said when he first got involved with the act two years ago, it was focused on independent craft brewers only. That was opposed by the large beer producers. Eventually a break for those manufacturers was added as well to get wide industry support.
He said although the growing deficit has some nervous, he believes that tax savings will encourage more investment and economic activity, as is happening in the brewing world.
“Your reinvestment means more jobs, a better economy,” he said.
Portman asked whether it was tough to find workers.
“Not necessarily,” said Dennis Kramer-Wine, director of culture at Cincinnati’s Rhinegeist Brewery, who noted that the company has recruited employees from Chicago, New York and other cities.
“With our volume, we can look all over the place now. I started here as the director of distribution. There’s no way I could get that job today.”
Beyond making the new tax rates permanent, Portman asked if there were other issues the industry was concerned with.
Horwitz also asked that the agencies the brewing industry works with, such as the Alcohol and Tobacco Tax and Trade Bureau, which regulates and collects taxes on the industry, be properly staffed and funded as well.
“If they don’t have the funds to do their jobs, that makes it harder for us to do ours,” Horwitz said.