CBMTRA Back Again!
We haven’t given you an update on the Craft Beverage Modernization and Tax Reform Act — affectionately called “com-BOO-tra” — in a while, and for good reason. It was rolled into the Tax Cut and Jobs Act of 2017, so, for the past year-and-a-half, it’s been the law of the land, cutting our excise taxes in half and allowing us to reinvest that money into making better beer for you.
However, that law — also known as President Trump’s controversial “tax cuts” — is set to expire at the end of 2019. So, we’re gearing up for another fight on CBMTRA, and, thankfully, New Jersey’s entire delegation to Congress has our back.
“I am proud to cosponsor the Craft Beverage Modernization and Tax Reform Act to provide tax relief to small, independent brewers like Cape May Brewery, support craft breweries across New Jersey, and help spur economic growth and create jobs,” said U.S. Senator Bob Menendez. “New Jersey’s 109 craft breweries support nearly 11,000 jobs and are primed for growth. That’s why I led a bipartisan Congressional Task Force that recommended the Craft Beverage Modernization and Tax Reform Act be signed into law so we can unlock the state’s burgeoning craft beverage industry’s full potential by reducing the excise tax, providing regulatory relief and ending tax uncertainty for small businesses.”
Congressman Van Drew agrees. A Cape May County native, he’s thrilled to see so many breweries opening in his district.
“It’s exciting,” says Congressman Jeff Van Drew (D-2). “It’s exciting to see opportunity for new — very often young — entrepreneurs who can express their entrepreneurial abilities and are also able to express their individual art. It’s a special thing, a craft brewery, because it allows you to really express all of the different kinds of brews and beers. It’s an exciting, fun, economically advantageous enterprise that fits particularly well in South Jersey because we have so much tourism and so much that’s related to the outdoors. We want to make sure that economic engine keeps moving, and one way to do that is through legislation like this where you reduce the tax burden and you incentivize the actual business itself and encourage it to grow and to expand. This is the kind of legislation I like to see.”
This reduction in excise taxes has helped Cape May Brewing Company immensely.
“We’re glad to see that New Jersey’s delegation to Congress has signed on to support this common-sense legislation,” Ryan said. “In the time that CBMTRA has been law, we’ve expanded from distributing to ten counties in New Jersey and five in Pennsylvania at the beginning of 2018 to delivering beer to all 21 counties in New Jersey and nine in Pennsylvania, nearly doubling our workforce in the process.
“We’d love to see that meteoric rise continue, and this reduction to our excise taxes will help.”
Alright. You probably need a refresher, so we’re going to start at the very beginning.
“So, what’s an excise tax?”
According to Investopedia, it’s a tax levied by federal, state, and local governments on businesses that make certain products or provide certain services. Fuel, tobacco, airline tickets, and bunches of other stuff are subject to excise taxes, including alcohol.
We make alcohol, so we gotta pay the government.
The way the excise law was crafted back in the 80s, breweries were subject to an $18 per-barrel tax, but, at the time, the few breweries that existed were all making a ridiculous amount of beer, as “craft” beer was only just becoming a thing. President Carter had only legalized homebrewing in 1978, so it would be a few years before our craft brewing pioneers would say, “Hey, I can do that!”
As the number of smaller breweries began to grow, an exemption of sorts was written in the bill for breweries producing less than 6 million barrels of beer — which, now, is every craft brewery in the nation — cutting their excise tax to $7 per barrel.
That was nice, but, when we’re talking about breweries our size, that 6 million barrel mark is so far out of our realm of existence that we’d have to double in size eight times to get anywhere near it. The new Dogfish Head/Boston Beer conglomerate isn’t even quite there yet. So, if you’re producing 6 million barrels of beer a year, that seven bucks is doable; for the rest of us, it was a bit much.
So, we began pushing for lower excise taxes earlier this decade. In 2015, there were two competing bills before Congress — the Small BREW Act and the Fair BEER Act — both of which sought to reform the excise taxes on brewers, but in differing ways, with the Small BREW Act benefiting smaller brewers and the Fair BEER Act benefiting the bigger guys.
Logically, with two competing bills, Congress didn’t do much with them — kinda like when you and your little sister couldn’t agree on which horrendously-bad-for-you fast food restaurant to eat at the mall, so your mother said, “We have food at home!” and you ate leftovers. They waited for the industry to come up with one bill that the entire industry could agree upon.
The original version of CBMTRA rolled into the tax cut bill did that: $3.50 on a brewery’s first 6 million barrels, $16 on every barrel after that.
Taxes on beer account for a whopping 40% of what you pay at the register. Between state sales tax, state alcohol tax, federal excise tax, and various just-because-they-can taxes, nearly five ounces of a 12-ounce can of beer go directly to various governments. CBMTRA helped alleviate that.
In 2018, CBMTRA saved New Jersey’s craft breweries over $500,000 in excise taxes, allowing that money to be re-invested in their businesses, stimulating local economies.
And they really re-invested. We’ve seen over 160 new jobs created within the industry between 2017 and 2018, and these jobs don’t exist in a vacuum: there’s a ripple effect. Each time a new job is added in the brewing industry, in our state, it supports 7.4 jobs in associated industries: farmers, suppliers, label makers, bartenders, servers — the people who sell us things need to hire more people and the people who sell our things need to hire more people. In all, New Jersey’s brewing industry supports nearly 11,000 full-time jobs throughout the state.
“America’s small and independent craft brewers are thrilled to see such strong bipartisan support for the Craft Beverage Modernization and Tax Reform Act from New Jersey’s federally-elected officials,” said Bob Pease, president and CEO of the Brewers Association. “The craft brewing industry is an important economic driver in New Jersey, contributing 10,948 jobs and more than $1.6 billion to the state economy. We are grateful for the support from the entire New Jersey delegation and hope to see this important legislation made permanent in 2019.”
Nationwide, since the reduction of excise taxes was made law, 73% of breweries are purchasing new equipment or upgrading their tasting rooms and breweries, 53% of breweries are hiring new employees, 39% are increasing their employee benefits by raising pay, offering insurance and expanding vacation time, and 21% are increasing their charitable contributions. In addition, 58% are doing two or more of those things, allowing breweries nationwide to Be a Good Neighbor, just like CMBC.
And you thought we only made good beer….
We want to see that growth continue. When we opened our doors in 2011, there were only 23 other breweries in the state. Now, there are over 140, with another dozen or so in planning, and, as we always say, a rising tide raises all ships.
Supporting independent breweries is big business for New Jersey, and our legislators are on board.
Earlier this year, New Jersey’s Senator Menendez, as part as the U.S. Senate’s Finance Committee’s Tax Policy Task Force, recommended making CBMTRA a permanent law of the land. The four members of the Task Force had already signed on as co-sponsors to the bill.
“The Task Force would like not only to have this provision extended,” they wrote, “but furthermore see the Craft Beverage Modernization and Tax Reform Act enacted on a permanent basis.”
So would we! Right now, CBMTRA has 288 cosponsors from 48 states in the House and 70 cosponsors in 44 states in the Senate. If this bill comes up for a vote, it’s a slam dunk. It simply needs to get there.
We hope that Congress takes up this bill in the near future, keeping this much-needed legislation as a permanent part of our tax structure.
“As a New Jersey native, I couldn’t be prouder that our entire delegation supports important, bipartisan legislation that recognizes the critical role breweries play in America’s economy,” said Jim McGreevy, President and CEO of the Beer Institute, a nationwide organization representing the interests of brewers both large and small. “The beer industry supports 2.1 million good-paying U.S. jobs, including more than 45,000 in New Jersey. Ensuring all brewers and beer importers can continue to count on federal excise tax relief is key to making sure our nation’s more than 7,000 active brewers continue to thrive, innovate and provide Americans with more varieties and styles of beer — our nation’s most popular alcohol beverage.”
And you can help! You can write your Congresspeople to let them know you support CBMTRA becoming law — particularly if you live in the 4th, 5th, or 6th districts in Pennsylvania. Your Congresspeople haven’t signed on as co-sponsors yet. Get them to sign on!
Many thanks to Bart Watson, Katie Marisic, and Maggie McClain at the Brewers Association for their research and guidance on this blog.