The unique economics of Washington craft beer

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There are currently 274 breweries in Washington state, and 78 in the Emerald City. No other city in the world can boast Seattle's numbers. Even San Diego, long championed as the city with the most breweries, falls just short of Seattle at 74. Portland has 58. Statewide, a whopping 83 breweries opened for business just last year alone, a nearly unparalleled rate of growth.

Beer is a major economic force in the state. The craft beer industry contributed over $1 billion to the state's economy in 2012, and it’s easy to assume that number has since grown, with an additional 103 breweries setting up shop in the past three years. Furthermore, over 75 percent of the nation's hops are grown in Yakima Valley. Sure, Oregon and California's brewers bring in more money overall, but Washington is in a unique economic position. As Bart Watson, economist for the Brewer’s Association, put it, “When both the resources and the beer are made in state, all of that revenue goes right back into the state.”

According to the Brewers Association, the national industry took in over $33.9 billion in 2012, and now employs over 115,000 people. Small brewers have become big business, and legislators are starting to take notice. A bill called the Small BREW Act is about to start making its way through Congress, with real implications for Washington's economy. It would change the federal tax rate on beer for those breweries producing less than six million barrels a year. Since only one brewery in Washington (Redhook) produced more than 60,000 barrels last year, the new tax rate would be a boon for breweries statewide, potentially invigorating one of the state's most self-contained cash cows.

“Small brewers have been anchors of local communities and America’s economy since the start of our history," said Sen. Ben Cardin (D - MD), who introduced the Small BREW Act. "The federal government needs to be investing in industries that invest in America and create real jobs here at home."

If passed, Cardin estimates the breaks will help generate an additional $172 million in the first year alone, and another $990 million over the next five years. He also predicts 5,000 new jobs in the first 18 months after the bill passes and an astounding 6,400 more jobs over the following five years.

However, a version of the bill failed in 2013, and an opposing bill is also making the rounds in Congress: the Fair BEER Act. Like the Small BREW Act, the similar sounding Fair BEER Act would also provide lower tax rates on barrels of beer produced by smaller breweries. However, there’s a reason the Fair BEER Act is supported by Anheuser-Busch and MillerCoors , while the Small BREW Act is not. Hidden within the Fair BEER Act are also tax breaks to the four largest corporations in the industry, which control 89 percent of the market.

“The Fair BEER Act is essentially a red herring," Sean Sullivan, executive director of the Maine Brewer’s Guild, told Eater. "It proposes an unrealistic amount of tax cuts that predominantly benefit the biggest players in the industry — also known as the only breweries who are cutting jobs and shipping profits offshore (and are, in some cases, owned by foreign-controlled conglomerates)."

As noted, Washington's in a prime position to benefit from craft beer's steadily growing place in more pint glasses and fridges, and legislation aimed at building the industry. The reason is Yakima Valley, home to the vast majority of all hop acreage in the USA. The area is unique, in that farmers there can grow three distinct varieties of hops in three different parts of the valley. The Moxee Valley is known for its aroma crops, the Yakima Indian Reservation grows what are perhaps the best alpha level hops in the world, and the Lower Yakima Valley grows huge amounts of the super alpha variety. Washington brewers have a constant stream of three distinct varieties of locally grown hops.

Small Washington breweries support local hop and grain farmers. Local bars, brewpubs, taprooms, liquor stores, and restaurants also keep the money in the state. Washington features America's most brewery-rich city, and is the state most suited to benefit from all those suds. When people think of the craft beer capitol of America, they often think of Oregon or California. When you look at the numbers, maybe Washington deserves the title.


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About the Authors & Contributors

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Robert LeCompte

Robert LeCompte is an editorial intern at Crosscut. He studies communications and film at The Evergreen State College where he recently transferred from Maryland. When not working, he can usually be found writing on his blog, watching movies or writing scripts. You can follow him on Twitter at @RDLeCompte or read about movies on his blog,