Trae Carson is the only employee on the payroll of 405 Brewing, which he co-founded in 2015. Ryan Krill has expanded Cape May Brewing Co. to 65 employees from one since co-founding it in 2011.
The two men from two different states have the same plan for next year: use savings from a cut in the federal excise tax rate to grow their breweries. Congress included Craft Beverage Modernization and Tax Reform as part of the sweeping tax reform bill it passed this week.
Brewers of all sizes will see lower federal excise taxes; though, as the name suggests, smaller producers will save the most proportionally. The measure adjusts excise taxes for distillers and wineries, too.
Carson expects Oklahoma-based 405 Brewing will save about $1,200 on the 300 to 400 barrels he expects to produce. The amount may seem minuscule, but it's enough for Carson to make an extra one or two batches of beer.
Krill expects New Jersey-based Cape May Brewing Co. will save about $50,000 on its 12,000 barrels. That will help him fund an expansion of the brewing facility and help pay salaries of new employees.
"The tax reform bill is really important to us because it reduces our beverage excise tax bill," Krill said. "We pay federal and state excise taxes, and sales tax in our tasting room. This reduces the level of beer tax we pay, which is really exciting for us because we can take that money and invest in people, equipment and real estate."
Brewers who produce 2 million barrels or less will see their federal excise tax rate halved, to $3.50 per barrel for the first 60,000 produced, from $7 per barrel. The overwhelming majority will pay $3.50 across the board, since at least 97 percent of breweries in the country produce less than 60,000 barrels, according to estimates from the Brewers Association.
The 182 brewers who produce between 60,000 and 2 million barrels per year will also pay $3.50 per barrel on the first 60,000 produced. After that, they'll pay $16, down from $18.
Industry groups and brewery owners have heralded it as a boon for the economy that will allow business owners to hire more people and make better beer.
"There's no one-size-fits-all," said Brewers Association CEO Bob Pease. "Right away some breweries will go out and hire people, and that's music to our ears. That's probably not normal, but we're confident businesses will take those savings and reinvest them back into their businesses."
Though the cuts could be a boon for small brewers, they may not be felt as much for mega-brewers such as Anheuser Busch InBev and Molson Coors. Big brewers will experience the largest cut in terms of dollar amount. For those producing more than 2 million barrels of beer, they'll pay $16 on each of the first 6 million produced, down from $18. The $2 difference equates to $12 million of savings per year. All beer after that would continue to be taxed at the current rate of $18 per barrel.
"We always thought tax relief should be fair, balanced and equitable," said Beer Institute CEO Jim McGreevy. "That's what this beverage bill has done for brewers. All sizes get relief under the bill, especially small brewers, and we see that as a win for brewers and beer importers of all sizes and that's great for beer going into the future."
The celebration won't last too long. The measure included in the tax reform bill expires after two years. Industry groups had originally lobbied for the cuts to be permanent.
The Brewers Association will savor the victory for the next week or so, Pease said. Then come the new year, it's right back to work.