The Taxman Cometh

And I’m not even talking about the looming U.S federal income tax deadline, rather, I’m talking about the 500% increase in taxes on beer production that’s been proposed by the Governor of the State of Washington, Jay Inslee

As I’ve gotten older, I gotten more cynical about government — who hasn’t, right?  But cynicism doesn’t change the reality of any situation, and I realized that I’m not doing anything to change that reality.  Today I sent a message to three representatives in our state House, Mark Hargrove, Pat Sullivan and Joe Fitzgibbon, and the text of my message is included below, if you’re interested in reading it.  Hargrove and Sullivan are the representatives for my residence and the desired location for the brewery.  Fitzgibbon appears to be a potential champion of the cause, and he’s on the House Finance Committee.

I also realize that a sternly-worded letter isn’t likely to change reality any more than cynicism is, but I am voicing my opinion to my representatives, right?  Isn’t that how it’s supposed to work?

This tax increase is an extremely hot topic in the WA brewing industry right now, as you might imagine.  The potential economic impact to small brewers is, from my perspective, staggering.  Let’s take a look.

You know what?  Let’s not.  You should, though.  Washington Beer Blog did it better than I would, and I have other work to do.  Educate yourself, beer drinker, for the sake of all that is local beer — seriously — then talk about it with someone else and let the legislature know if you think it’s the right thing to do.

Text of my email to my representatives:

I am writing to ask that you reject any bill or proposal that will increase taxes on beer production, and that you provide vocal support to the WA Brewers Guild’s request to exempt microbreweries from the permanent $23.58 per barrel tax proposed by Gov. Inslee.

I am in the process of starting a brewery in the city of Auburn.  My residence and my desired location both lie within your jurisdiction.  Having just been laid off my from job at <some local company>, I have an incredible opportunity to focus on starting a business that will source its raw ingredients from Washington agricultural producers, and will provide jobs to local residents, tax income to the city and state, and fantastically good beer to the residents of the city I’ve lived in for over 26 years.  This proposed tax increase puts my dream at risk at a time when I can little afford to see more money go out the door.

The mass producers of beer have already been paying this tax, but the small producers have not.  This exemption has not given the small brewers any real competitive edge against the big boys, who have tremendous economy of scale, but it has allowed the small brewers to retain more of their earnings, and virtually all of them have invested those earnings back into their businesses in the form of equipment, real estate and labor (jobs!).  An $18.80 increase on each barrel of beer is a HUGE increase in costs to these small businesses — well over 5% on every keg they ship out the door.

I applaud the directive to properly fund the education system in Washington, but I’m asking that you don’t do it at the expense of one of America’s fastest growing industries.  Because all of the new breweries in Washington are “microbreweries”, this change in policy will affect EVERY SINGLE NEW BREWERY in the state.  Washington’s beer products are widely-known, but we have a long way to go to compete with states like Oregon and Colorado.  I feel strongly that Washington, the largest producer of hops in the world and among the country’s leaders in barley production, has perhaps the greatest potential of any state to provide world-renowned beers that could be household names like Microsoft, Amazon and Boeing have become.  If you allow Gov. Inslee’s proposal to to move forward in its current form, you will dilute that potential.

Today I happen to be working on outlining my production costs.  These numbers will determine my fate with investors and creditors, and ultimately will decide if I can afford to start this business.  Right now the spreadsheet says that state taxes will cost me $4.78 per barrel, and the totals look okay.  When I type $23.58 into that field, the numbers change — and so do my chances of success.