OLYMPIA — Brewers of craft beers are trying to bottle up a tax increase that would drive up the price of their golden elixir.
Democratic budget writers in the House want to nearly double the state tax imposed on each barrel of microbrewed ale produced in Washington and steer those dollars into the public school system.
It’s one of several sources of money Democrats and Gov. Jay Inslee are eyeing in order to generate an additional $1 billion for education in the next two-year state budget.
But the men and women who make, sell, pour and drink the handcrafted beers of small Washington breweries are fighting back, contending jobs will be lost and businesses shuttered if the state taps any deeper into their income stream.
“The whole thing is absurd,” said Ron Walcher, owner of Skookum Brewing Co. in Arlington. “How do you budget for a 100 percent increase in a tax? It keeps adding up. It’s crazy.”
Washington enacted its beer tax in 1934, initially charging brewers and distributors a $1 fee on each 31-gallon barrel of beer.
It’s gone up steadily since then and on June 30, 2010, firms producing or distributing in excess of 60,000 barrels a year paid a state tax of $8.08 per barrel while those producing less paid $4.78.
On July 1, 2010, lawmakers temporarily increased the tax to $23.58 per barrel on those large distributors while leaving smaller brewers untouched. Money raised from the increase helped offset a decline in tax collections statewide due to the recession. It is set to expire July 1.
But Gov. Jay Inslee and House Democrats are looking to extend the tax permanently and expand it to Washington’s roughly 200 licensed small brewers.
Under the House proposal — which is the only one under discussion — large producers would pay $16.83 a barrel; that’s less than the current rate but still more than 2010. Microbreweries, meanwhile, would see their rates rise to $9.43 a barrel.
On Friday, several dozen brewery owners, employees and customers rallied against the increase on the steps of the Capitol. Wearing jeans, jackets, work boots and ball caps with company logos, they carried signs and chanted, “We’re here for Washington beer and jobs.”
Among those who turned out in the steady rain to plead to let the breweries grow was Bob Maphet, founder and president of Diamond Knot Craft Brewing in Mukilteo.
“It’s a blue collar beverage and it’s a blue collar industry,” said Maphet, who opened his business 19 years ago. “We need to have our voices heard.”
Proponents of the increase said it would only add 14 cents to a six-pack of mass-produced beer and eight cents to six-packs of microbrews. Most of the beer made by small brewers is sold in kegs to restaurants and bars, which in turn around and sell it in pints.
“In the end, it could push up the price of a pint of beer by as much 50 cents or a dollar,” Maphet said.
Friday’s rally followed a lengthy public hearing in the House Finance Committee on the entire Democratic tax proposal. The measure’s chief sponsor is the committee chairman, Rep. Reuven Carlyle, D-Seattle.
House Bill 2038 repeals or modifies a dozen tax breaks, extends and expands the beer tax and makes permanent a surcharge on the business and occupation tax paid by professional services.
Supporters called it a responsible proposal to preserve social services and comply with a Supreme Court decision demanding the state better fund its public school system.
“We believe this bill doesn’t disadvantage anybody,” said Nick Federici, a veteran lobbyist for providers of social services
Educators and education reformers alike endorsed it because of where the money will go. The beer tax would bring in nearly $30 million a year, according to estimates of the Department of Revenue.
“Washington needs additional revenue if we’re going to fully fund our kids’ education and provide the services they need,” said Rich Wood, spokesman for the Washington Education Association. “We can’t scrimp on our children’s future.”
If anyone understands microbrewers’ concerns it is Carlyle, whose district includes Ballard, which he described as the “heart and soul of the artisan craft beer industry worldwide.”
“I think they make a strong argument for the uniqueness of their industry,” he said. “Everyone loves the nectar of the gods. We’re just asking for a little bit of fairness.”
By that, he means bringing their rate closer to that paid by large producers and distributors.
But representatives of those large firms don’t want the increase either. They insist the state keep its promise to let the 2010 beer tax increase expire. They said their beer sales dropped when the tax took effect and have not come back.
The next step for the beer tax — as well as the tax breaks proposed for elimination — could soon be known. The House Finance Committee is scheduled to meet Tuesday to consider action on the bill.
Carlyle last week planned to draw up a menu of options based on what he heard in the hearing then proceed. Though the Republican-controlled Senate majority are awaiting the package, Carlyle didn’t sound hurried about getting it to them.
“We’re happy to move forward,” he said. “Our good and gracious friends in the Senate have a package of bills that provide the building blocks for their budget that they have not passed. Right now, we’re both in our boats winking at each other.”
Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.
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