The Bitter Truth about Beer Tax
A Message from Gary Fish
A bill has been drafted that will get considerable play in the upcoming legislative session in Salem. The bill “imposes a malt beverage cost recovery fee of $32.00 per barrel of 31 gallons.” This amount is in addition to the $2.60 per barrel currently charged by the State of Oregon. That’s right, a 1,300%+ increase in the tax on beer! Oregon would go from the fifth lowest to the highest in the nation immediately!!
Now that that amount has settled in, it might be valuable to understand the rationale for such an insane increase. According to the act:
1 Oregon has one of the lowest, if not the lowest “effective tax” on malt beverages in the Nation. Actually, Oregon has the 5th lowest excise tax in the nation behind Wyoming, Missouri (Anheuser Busch), Wisconsin (Miller) and Colorado (Coors). And what do those states have in common? I left you hints in parentheses. OK, Wyoming just likes low taxes. They are producer states who tend not to tax core industries that produce for the rest of the country and bring benefit to their state. Oregon has the healthiest craft beer industry in the nation, by far.
2 Oregon’s current wholesale malt beverage tax is a fixed rate that does not keep up with inflation and has not been raised for 30 years. True. Logic does not connect that with the need to increase taxes and hurt homegrown businesses. The state of Oregon is currently running a budgetary surplus. Excise taxes are fundamentally regressive as well because they impact lower income earners disproportionately. And if our only criteria for raising taxes is how long it has been since it has been raised, I’m guessing quite a few others may be ready for an increase as well. Where is the logic? Where is the sense? Oh, yeah, it’s Salem.
3 Oregon collects only $1 of alcohol tax for every $39 of alcohol-related healthcare costs. I thought we were talking about beer, not alcohol in general. How many of you responsible beer drinkers are costing society that $39? Punishing all beer drinkers for what alcohol might do across a broad spectrum of the society is bad public policy. Meanwhile there is increasing scientific (the real thing) evidence that moderate consumption of alcohol (primarily beer and wine) is actually beneficial to health. Where is the credit for that? And, who can deny the benefit to society of the local pub where people actually talk to each other rather than sitting secluded in a dark room in front of a keyboard and monitor for their human interaction. Maybe those people in Salem need to visit their local pub a little more often.
4 Alcohol abuse and alcoholism cost each Oregonian $683 annually. I don’t know where this number comes from, but as with the bullet above, the vast majority of beer drinkers are responsible, moderate drinkers. As mentioned above, there is increasing evidence moderate drinking may very well be beneficial to a person’s health. Add to that, the excise taxes the state currently collects on beer and wine do not go to this effort. Why not start by redirecting those funds first? By the way, anyone think of taxing fast food for the obesity epidemic, or cars for the rash of accidents? Some think this new source of revenue would be appropriate to help with the meth epidemic. Beer=Meth=what!!??
5 17% of alcohol sold in Oregon is consumed by underage drinkers. Again, the source is unclear and refers to alcohol, rather than beer. But, beer is the only beverage being unfairly targeted. The beer industry spends millions (aka taxes itself) annually on keeping beer away from underage drinkers. And since statistics have been kept since 1982, all indicators nationally continue to decrease steadily regarding underage drinking, showing the programs are working and real progress is being made.
6 Increasing alcohol taxes reduces underage drinking. The statistics surrounding this are unclear at best and show no connection at all, at worst. What is clear is that any consumer group that operates outside the law is the least price sensitive group there is.
There is more to the proposal, but you get the picture. What seems to be missing in the proposal is Economics or Business 101. The proposal assumes that the increase will be passed directly along to the consumer at their “dime-a-drink” rate, as though this was a sales tax. It is a tax on the manufacturer, or importer. With us, this becomes part of our cost structure like all other taxes (property, payroll, income, etc.) which we then figure out how to make a profit on (if we can). We then sell to a wholesaler, who adds their percentage and sells to a retailer who also adds their percentage. So, assuming we could pass it along, it would be much more than that “dime-a-drink” by the time it got to you. Reality is that, in a competitive marketplace, it is very difficult to pass along costs directly when competing with multi-national companies who have vast markets to cost-share with. Our own pricing structure has not kept up cost increases for at least the past five years.
The proposed bill actually states that the increase will “help Oregon’s small breweries (less than 200,000 barrels) by leveling the playing field with the large (read out-of-state) breweries. This is a clear violation of the Interstate Commerce Clause of the Constitution by penalizing out-of-state business in favor of in-state business. Meaning that the bill could be overturned requiring all collected monies to be returned, leaving an even bigger hole in the state’s budget. (Then what do you think they would do?) Now, Deschutes Brewery currently falls below that 200,000 barrel threshold (we will produce around 160,000 barrels in 2006). However, we hope (and expect) to pass that mark in the next couple of years. When we do that 200,001st barrel will cost us well over $2,500,000 in taxes!! I’d call that a disincentive to grow wouldn’t you?
I could go on and on about why this proposal is horrible public policy. Suffice it to say, if you love, and are passionate about beer in Oregon, you will want to watch this one develop as the legislature goes into session after the New Year. We may be asking people to let their legislators know not to tax their beer! We may all have to participate to keep this ridiculous proposal from becoming reality. Let your elected representative know you don’t want your beer taxed any more!! |