Wednesday, June 2, 2010

Small-brewery tax cut floated

Coloradoan article "Small-brewery tax cut floated" (June 1st, 2010) discusses a small-brewery tax cut that has been introduced as a bill in the U.S. House and Senate. It would reduce taxes for small breweries.
The bill stems from a prolonged effort in 1975 to get a tax differential between small and large brewers leveled. The largest brewer in 1975 produced about 40 million barrels of beer. Today they make more than 100 million barrels per year, thus the tax differential needs to be updated to maintain competition, Gatza said. 
"So this is really an attempt to bring up to date that original legislation from the mid-1970s to level the playing field," Gatza said.

While Corrections is in favor of reducing taxes under any circumstances, for any excuse, with any reason whatsoever, the reasoning behind the article is not immediately clear. Corrections offers a figure from the Brewer's Almanac 2009 that displays both U.S. Breweries over time as well as draught production in gallons (click to enlarge).

We may see from the chart that, since 1975, we have observed 3000% percent increase in the number of brewers. Most of this came in a matter of years, suggesting (though not definitively) a very elastic supply. Such an enormous increase in small breweries as well as a large elasticity of supply would suggest that there is little need to single out small breweries for a tax break. It would appear to be the product of political machinations rather than real concern for the industry.


  1. Well reasoned. Particularly the point that any reduction of taxation since it basically allows free people to spend their money without government imposed penalty is inherently a good. It seems to me though that the underlying question is what is it in the Constitution that gave these statist busybodies the right to decide that one business should be penalized to the comparative benefit of another? The reality is that this is all about lobbyists and their partner politicians - both with the morality of prostitutes distorting free economic choices by illegitimately using the power of the state to hammer businesses who do not pay the lobbyists and politicians adequate protection money. Disgusting.