Two separate bills introduced during the new legislative session has Nebraska's growing brewery industry nervous. Senators Tom Briese and Curt Friesen have introduced LB314 and LB497, respectively, which seek to relieve property tax by upping tax per gallon on beer from 31 cents per gallon to $1.38 on every gallon of beer brewed in-state. That's a 345 percent tax increase on brewers, leaving some brewers like Johnnie Byrd Brewing Company's Greg Ptacek wondering what it's all for.
"We pay 11 cents per gallon for federal taxes and we pay 31 cents right now per gallon for state taxes so that will go from about $1,200 to about $4,500 and that's just at our current production," Ptacek said. "It doesn't sound like a ton of money but if you put it into where our expenses break down, this would literally be right behind grain and hops so everything it takes to make beer, this is going to be as expensive."
Increasing excise tax on vice items like alcohol and tobacco has been done before, but the economic impact of a 345 percent tax increase on a growing, attractive industry like craft breweries could have impacts on rural communities.
"It would certainly stunt growth and be a hinderance to new breweries, especially in rural areas," Gabby Ayala, executive director of Nebraska Craft Brewers Guild, said.
Nebraska Craft Brewers Guild is an organization of roughly 94 percent of the state's breweries, by Ayala's calculation, that works to support local breweries and further a business-freindly community for breweries.
"The margins are extremely small for small-scale brewers anyway, so this increase would really make it tough," Ayala said. "This increase would make Nebraska the number one highest excise taxed state and right now, we're already the highest taxed in our seven-state region."
The average tax per gallon of brewed beer is 13 for the states surrounding Nebraska. Ptacek said there's a pattern for states with high excise tax on breweries.
Tennessee, Georgia and Alabama are similar to Nebraska's potential excise tax and those states also have fewer breweries per capita according to Ptacek.
"We've seen a giant craft beer boom in Nebraska," Ptacek said. "We're getting up there for breweries per capita and if you see this excise tax coming then I think you're going to see a lot more scale down and only the big guys are going to actually be able to stay afloat."
LB497 was only introduced on Jan. 22 and LB314 is still in the revenue committee's hands, so Ptacek and Ayala are hopeful about the outcome.
"Property tax is a huge issue for our state's farmers and ranchers and we certainly don't want to minimize that," Ayala said. "We are being proactive and asking our brewers to reach out to their senators and to all the senators on the revenue committee."
Ayala also said the guild has had open communication with both senators and other who have endorsed LB314 and is happy with those interactions.
Ptacek and several other brewers have encouraged customers to reach out to Briese and express concerns civilly.
"I think he really just wants to do something about property tax," Ptacek said. "Sen. Briese is a nice guy and he's not doing this with any vindictive motive so he deserves our respect as a state senator."
Ptacek said he hopes those trying to fix property tax by raising excise tax see that for many small communities, having amenities like a brewry can be place-making and an attractive destination for out-of-towners.
"If you keep taxing all of these small businesses what do you have left to prop up farmers and this rural economy other than the farm?" Ptacek asked. "If we tax these things to death we're going to lose what actually makes rural economies grow and makes rural communities."
For more information about both bills visit https://nebraskalegislature.gov/bills/
