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Brewers bubbly at potential tax break

Staff and wire report
November 25. 2017 9:31PM
Sen. Rob Portman, R-Ohio, accompanied by Sen. Roy Blunt, R-Mo., Sen. Pat Toomey, R-Pa., and Senate Majority Leader Mitch McConnell, speaks with reporters following the party luncheons on Capitol Hill in Washington, D.C., Nov. 14, 2017. Portman is in favor of a two-year tax break for producers of beer, wine and spirits. (REUTERS/Aaron P. Bernstein)

WASHINGTON - Nationwide deaths linked to alcohol are significantly more common than drug overdose deaths, but lawmakers might promote more drinking through a two-year tax break for producers of beer, wine and spirits as part of the Senate's tax-code overhaul, critics say.

The tax break, for 2018 and 2019, would save alcohol producers $4.2 billion, according to the Joint Committee on Taxation. The provisions in the Senate Finance Committee's tax plan were requested by Republican Sen. Rob Portman of Ohio, but are based on a bill from Sen. Ron Wyden of Oregon, the committee's top Democrat.

Supporters of the tax break emphasize its benefits for small brewers, whom they tout as job creators. But public health experts who study the link between taxes and alcohol consumption think the economic effects are overstated, especially since the underlying idea is for people to buy more alcohol.

Today there are 71 breweries in New Hampshire, many of them so-called nanobreweries that make no more than 2,000 barrels of beer per year.

Portman touted the job growth potential during the Finance Committee's markup last week.

"The industry now supports about 15,000 jobs. Sixty-one new breweries have opened just last year alone in Ohio," Portman said. "This legislation is only going to promote the expansion and the jobs that come with these entrepreneurial small businesses."

All alcohol producers - including giant brewers, wineries and distilleries - would benefit from the changes. The Beer Institute, which lobbies on behalf of all brewers, estimates that it would save the beer industry $130 million a year. Large brewers like Anheuser-Busch InBev, the global conglomerate that makes Budweiser and produces more than 100 million barrels of beer in the United States, would get a modest tax break, around $12 million. Anheuser-Busch operates a brewery in Merrimack. N.H. has some smaller brewers that would get a steeper cut for the first 60,000 barrels they produce. A brewery that makes 10,000 barrels a year would save about $35,000 annually.

Former state Sen. Dave Currier, a Henniker Republican, said he became the 17th brewer in the state when he co-founded the Henniker Brewing Co. in July 2012.

According to the Brewers Association, New Hampshire's economic impact from the beer-brewing industry in 2016 was $353.5 million, which was more than brewers deliver in Vermont and Rhode Island.

"We are not a mature industry; we continue to substantially grow year after year," Currier said.

The beer tax proposal is not a new idea.

"This bill has been around for five years and over time has been fine-tuned to meet everyone's needs," he said.

Indeed, U.S. Rep. Ann Kuster, D-N.H., championed this idea and co-sponsored the tax break as a stand-alone bill in 2013 when she was a new congresswoman.

"The idea behind it was to encourage this type of innovation and growth at the local level," says Kuster.

NH lawmakers on board

Originally, the bill was earmarked only for smaller or craft breweries like Currier's, cutting their federal tax in half from $7 to $3.50 per barrel.

The state beer excise tax is even higher - $9.30 per barrel, which equals 31 gallons.

"If you count state and federal excise taxes on beer, it comes to $16.30," said Currier. "... If you got rid of these taxes, a six-pack of beer would cost the same as Mountain Dew."

All four members of the state's congressional delegation are on board with the proposal, Currier said.

"There are 52 sponsors from both political parties and it would obviously be a real economic stimulus for small business," Currier said. "The failure to pass it to this point is all gamesmanship."

For larger brewers like Anheuser-Busch in Merrimack, Smuttynose in Hampton and Red Hook Brewery in Portsmouth, the proposal would lower the tax rate to $16 per barrel for the first 2 million barrels produced or imported, and after that it would go back up to $18.

The Brewers Association, which represents the smaller producers, thinks that these relatively minuscule amounts would go a long way for their members.

"All of those breweries would take that savings and reinvest in their physical plant," Bob Pease, the Brewers Association's president, said in an email. "That reinvestment would allow those breweries to make more beer. When small and independent breweries produce more beer, they create more jobs and hire more workers."

Public health experts cited potential harm from greater alcohol use and cast doubt on the economic effects.

"If the purpose of the bill is to generate more jobs, more economic activity, the only way that's going to happen is if they generate more business," said David H. Jernigan, a professor at the Johns Hopkins Bloomberg School of Public Health.

Consumption climbing

Adam Looney, a senior fellow in economic studies for the Urban-Brookings Tax Policy Center, said this tax break will lead to more loss of life.

"Based on empirical studies measuring the link between alcohol taxes and alcohol-related injuries, I estimate the legislation will cause between 280 and 660 additional motor vehicle deaths a year and approximately 1,550 total alcohol-related deaths annually from all causes," Looney said.

"Of course, the economic costs associated with alcohol extend well beyond deaths and include alcohol-related injuries, crime, domestic violence, alcohol-related disease, and associated costs to families and local law-enforcement and health providers."

The tax changes would come as per capita alcohol consumption is climbing after dramatic decreases in the 1990s, which followed record consumption rates in the preceding decades.

On average, every American age 14 and over consumed the equivalent of 258 beers, 104 glasses of wine and 168 shots per person in a year, down slightly from its recent peak in 2012. Increased consumption of wine and spirits is fueling the rise, while beer consumption has dropped slightly.

Excessive drinking is concentrated among a relatively small number of drinkers, since only 56 percent of the population reported having a drink in the past month in 2015, according to the National Institute on Alcohol Abuse and Alcoholism. On the other hand, 26.9 percent of adults reported binge drinking - four or five drinks within two hours - and 7 percent reported "heavy" use, defined as binge drinking five or more days in the past month.

The most recent data from the Centers for Disease Control and Prevention on alcohol-related deaths come from 2006 to 2010, when each year on average there were 88,000 deaths from alcohol poisoning, traffic accidents or consumption-related chronic conditions. By comparison, drug overdose deaths are likely to be around 65,000 for 2016. The CDC estimates that in 2010, excessive drinking resulted in economic losses of $249 billion.

There has not been extensive research into how a tax cut could affect consumption. But Philip J. Cook, a Duke University professor of public policy, has examined the result of the original 1991 excise tax that the industry is now seeking to reduce.

"What we know is that a higher tax reduces drinking. That's perfectly clear compared to what it would be otherwise," he said. "With reduced drinking comes reduced mortality both due to drunkenness and to chronic alcoholism."

While the industry and its supporters frame the tax cuts as a job-creation tool, researchers point out that the opposite may be true.

Public health arguments against an alcohol tax cut are unlikely to gain traction in Congress, where a majority of members support cuts.

Union Leader Staff Writer Kevin Landrigan and CQ-Roll Call contributed to this report.

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