In the midst of the nation’s worst recession in a generation, one of the few bright spots for New York has been the revival of the state’s craft beer industry. Now more than 90 breweries strong, the industry accounts for 3,000 jobs and pumps more than $200 million into our economy. But a recent legal settlement and other impediments threaten to sap the vitality of small brewers if Albany doesn’t act soon.
This comes at a time when many of us are trying to spread our wings. Brooklyn Brewery, my company, is completing a $12 million expansion in Williamsburg. Both Ithaca Brewing and Southern Tier recently announced major expansions. The growth of our industry has also propelled the rebirth of several others, most notably hop farming, which is poised to return as a major cash crop upstate.
That’s why it came as such a blow in March when the state settled a lawsuit by a small importer. As a result, an excise tax exception that had largely been responsible for the craft-brewing renaissance will be eliminated.
The incentive had exempted New York-based breweries from paying state and city excise tax on their first 200,000 barrels of production (one barrel is about 14 cases of beer).
Brooklyn Brewery is on target to brew about 180,000 barrels this year. The ruling will cost us nearly $600,000 in new taxes.
Last year, New York collected almost $60 million in state excise taxes from the brewing industry. This additional increase will surely wipe out the profit margins of small brewers who are struggling to bring good, locally made beer to the residents of New York.
As a result, they will either have to raise prices, lay off employees or scrap expansion plans.
What’s more, the tax issue merely compounds other impediments to the industry’s growth.
For example, New York breweries pay the highest brand label registration fees in the country — $150 a year for every brand. So for a brewery like ours, with roughly 40 brands to its name, that’s an additional $6,000 a year in fees.
This is a major burden for smaller breweries that are experimenting with dozens of different brands. Variety helps distinguish brewers in the marketplace, yet each new recipe requires an additional payment to the state. Meanwhile, if we were located in New Jersey, where registration is just $23 a brand, our costs would be dramatically reduced.
Luckily, we have some champions in Albany who are trying to help us. State Sens. Lee Zeldin (R-L.I.) and Daniel Squadron (D-Manhattan, Brooklyn) and Assemblyman Joseph Lentol (D-Brooklyn) are working on a bill that would give a tax credit for production and brand label fee registrations in New York, the same kind of incentive that has spurred the film industry and the increased use of biofuels.
And this tax credit would be revenue-neutral for the state budget — meaning it would not cost New York taxpayers any additional dollars.
We hope other lawmakers get behind this effort. There are breweries in nearly every legislative district in the state, and they will each suffer if Albany fails to act.
Make no mistake, brewers pay their fair share and are helping rebuild New York’s still-flailing economy. We ask only for smart legislation and regulation that supports — rather than strangles — our growing businesses. Come out to any beer festival this summer and you’ll see just how vital this industry is, from the quality of the product to the enthusiasm of consumers to the pride with which we flaunt “Made in New York.â€
In the 19th century, there were hundreds of breweries across New York, though the population was a fraction of what it is today.
Prohibition annihilated the industry, and it’s taken nearly a century to bring it back. We’re stronger and better than ever now, and poised to become a major economic accelerator for New York. Let’s not let shortsighted policies stop that growth again.
Steve Hindy is the co-founder and president of Brooklyn Brewery.
