Brewing up Small Business

Why your state lawmakers were taking a beer tour of Akron

by Dave Daly

On any given day, I’d rather break the law than hang out with people that make the law. Not really, but I was definitely entering foreign territory when our publisher asked if I could join some of our state lawmakers on a tour around Akron. At first I was a little unsure if I was the right man for the job. Then he mentioned there’d be beer involved, and I knew I had to do my civic duty!

Governor John Kasich’s proposed 2017 budget includes an increase in the statewide sales tax from 5.75 percent to 6.25 percent, as well as excise tax for certain commodities, including beer. These changes could have a direct impact on our state’s flourishing craft beer industry. The excise tax is currently only imposed on breweries producing 300,000 barrels or more per year, but under the new budget, would apply to breweries producing 10,000 barrels or more.

If you drink beer and don’t live under a rock, you’ve probably noticed that local breweries big and small have popped up all over Ohio. In Summit County alone, there are 14 beer producers open and operating, with another seven on the way. That’s a lot of suds. That’s also a lot of jobs and potential for more.

State Rep. Emilia Strong Sykes (D-Akron) is keenly aware of the positive impact local breweries have of on the economy. In order to educate other lawmakers and strengthen the dialogue between them regarding the proposed tax changes, Sykes hosted a unique brewery tour for her fellow legislators in the city she grew up in and loves, with the help of Greg Mervis, President and CEO of Akron/Summit Convention and Visitors Bureau.

Joining us on the tour were other State Rep.s from around Ohio, including House Majority Leader Fred Strahorn (D-Dayton), Rep. Glenn W. Holmes (D-McDonald), Rep. Thomas West (D-Canton), Rep. Kent Smith (D-Euclid), and Rep. Michael J. O’Brien (D-Warren), as well as other guests from various backgrounds that had a stake in the potential tax changes.

We all met at the John S. Knight Center, and just after 4 pm we boarded the trolley, a.k.a beer bus, which would transport us between breweries.

When we arrived at our first destination, Thirsty Dog Brewing Co., owner John Patrick Najeway met us in the tasting room and implored we get beverages in our hands immediately. I listened. Once everyone had their beverage of choice, John led us on a tour of the facilities, showcasing all the nifty devices used in the beer making process. All of the materials used in the brewing process at Thirsty Dog were made in the U.S.A. As the Thirsty Dog tour ended, I asked Najeway how the tax would affect his brewery.

“We all have an obligation to pay certain taxes, but putting that tax on will slow growth in the craft beer industry, and specifically us because the excise tax they want to lower down to the 10,000 barrel mark,” said Najeway. “Of the breweries you’re going to today, Thirsty Dog is the only one above that mark, so absolutely it will affect us.”

With a quick handshake I was off with the rest of the tour group to our next destination, Hoppin’ Frog Brewery, where owner and brewmaster Fred Karm greeted us warmly at the door. Karm ushered us over to a seating area reserved for Rep. Sykes’ tour group and quickly popped the top off a 22 ounce chocolate infused brew. Next up was a pitcher of Dankster, a fruity and flowery I.P.A. that pleased the taste buds. As we sampled Hoppin’ Frog’s flavorful beverages, I asked State Rep. Glenn Holmes whether he could see himself supporting the budget.

“It feels like a band-aid,” Holmes said. “There needs to be something more sustainable done to keep the budget in check. I think it’s a stop-gap measure in trying to plug holes in the budget that’s going to negatively impact micro breweries.”

After sampling the product, we joined Karm on the patio, where he addressed the group and shared his thoughts on the craft brewing industry and how the proposed tax increase would affect his business. Hoppin’ Frog currently produces approximately 1780 barrels of beer per year, so the excise tax changes wouldn’t impact his business. However, Karm worries that with the increased sales tax, he could see a dent in sales.

“Our beer is at the high end of the craft brew market,” Karm explained. It’s not uncommon to see a bottle of Hoppin’ Frog beer selling for $14 — $15 at the market. Any price increase makes that a harder sell for even the most seasoned beer drinkers.

After Karm entertained a few questions from our group and we finished our drinks, it was time to take off for our next destination, R. Shea Brewing, which is nestled in the Merriman Valley, right across from the Towpath Trail. We were greeted at the door and escorted to a sitting area where some of the most delicious pretzels and cheese I have ever eaten were awaiting us.

As our beer samples were delivered, owner Ron Shea joined us and gave us his view on the proposed tax increases. At 1.5 years old, his brewery is currently only producing 500 barrels of beer per year, almost all of which goes to the taproom we were sitting in. The brewery has big expansion plans though. By 2020, Shea anticipates exceeding the 10,000 barrel per year mark, meaning R. Shea would owe approximately $56,000 in additional excise tax if the changes were to go through.

At R. Shea, I had a great conversation with State Rep. and Minority Leader Fred Strahorn about the changes would impact small breweries.

“When I think of the brewers and small breweries, I think of them generically in terms of small businesses, and small businesses are, much like working people, taking the brunt of a lot of the bad tax policies,” Strahorn said. “When we do tax policies that release really big corporations and wealthy people from their tax responsibility, it gets shifted downhill. The folks that end up picking that tab up are working people and small businesses. At every level or facet of this discussion all the indications are this is bad policy and we shouldn’t do it.”

Although I would have happily continued on to the other 11 breweries in Summit County, time was not on our side, and we departed for the Knight Center to say our goodbyes. It’s clear that the State Representatives on the tour will resist the proposed tax changes. What’s not so clear is how the rest of the Representatives will vote, especially on the other side of the aisle. Personally, I’d like to see policies in place that allow small businesses like craft breweries the opportunity to grow.

Special thanks to State Rep. Emilia Strong Sykes for allowing me to join her on this tour.