Beer and Taxes
Jeff Alworth
I'm a good liberal. As Lars will tell you, that means I think taxes are a wonderful way to ensure things like health care, higher ed, and social services are available to those who need them. 
But what to do when the tax being discussed--as it is today at 1pm in Salem--is a tax on beer? (Yeah, yeah, I know from prior posts that some of you do not share my love of our local delicacy; no worries, you'll come around eventually.)
The beer industry in Oregon is one of the nation's most robust, employing 26,000 people and contributing something on the order of $2.2 billion to the state's economy. There are roughly 80 brewers across the state, and they brewed 25 million gallons of beer in 2006. Oregon produces the second-most hops in the country, and the ninth-most barley. Beer is a big deal here.
The rub is that Oregon brewers pay among the lowest excise taxes in the country, and the rate hasn't gone up since 1976. And while Oregon's breweries produce a lot, it's still just a fraction of the beer consumed in the state--the majority still drink Pabst and Bud. So these low taxes are being extended predominantly to vast industrial breweries in St. Louis and Milwaukee.
To Democrats, raising the beer tax seems like an obvious way to boost revenue. They have four versions of bills that would raise beer taxes anywhere from 375% to 1,235%, the funds from which would go to (variously) state troopers, mental health, and drug addiction services. In the most extreme version, which raises the tax from $2.60 a barrel (31 gallons) to $32 a barrel, an exemption is made for companies that sell less than 125,000 barrels in Oregon. That would currently exempt all Oregon breweries, though the larger ones might produce that much in a decade, if current growth rates continue.
So, the question is: will raising the beer tax hurt local breweries, or is it reasonable for them to chip in their fair share? It may be a losing battle here on BlueOregon, but there are a couple reasons I'm not super hot on any of these proposals.
- Fairness. All the taxes being considered are excise taxes and must be paid by the producer. But, when our home-grown Oregon brewers whip up a barrel of beer, a lot of people make money on it. The brewers sell it to distributors, and the distributors turn around and sell it to retailers. Of the $4 you pony up for an IPA at a pub, as little as 80 cents goes to the brewer. Yet the tax being considered by the legislature will only affect brewing companies.
- Function. For the purposes of this legislation, breweries are not being treated like other businesses. This is a "sin tax" designed to reimburse the state for various ills--"alcohol-related health-care costs," "underage drinking," "alcoholism." Yet Oregon breweries' contribution to these ills is not distinguished from wine, liquor, or industrial beer, nor are the health benefits acknowledged. No doubt some alcoholics choose stouts and some underage drinkers tipple barleywines, but certainly not in proportion to liquor and cheap beer. Breweries aren't complaining that they have to pay the usual taxes. But being treated like a tobacco company and being compelled to pay for state troopers is another matter.
- Incentive. Oregon's brewing industry is a huge success story. It brings money into the state, creates jobs, and employs Oregonians. Breweries are increasingly going green and they support local agriculture. They have transformed the corner bar from a smoky, windowless room into a family-friendly brewpub where drinking happens in moderation. Yet we are proposing to tax them merely for producing a product some people consider sinful. This is the kind of local industry we should be supporting, not penalizing. Breweries aren't asking for special favors, but they'd appreciate not being treated like shabby kin.
I'm still for health care, higher ed, and social services, but I am also for equity. Breweries already pay their fair share in local taxes. I just don't see how adding an additional burden on local business is an equitable way to pay for these worthy services.
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Apr 18, '07
Well said, Jeff! Portland has more breweries than any other city in the world--including Munich--and I consider that a badge of honor for our city. Trying to stifle this industry with an unfair tax seems like great way to allow other states or cities to take over. I wonder, what percentage of beer drank in Oregon is brewed in Oregon? And how do we compare to other states? Buy Oregon First, right?
Apr 18, '07
Pabst hasn't been brewed in Milwaukee, WI for years.
Apr 18, '07
You are dead on Jeff. I have a really quick fix. Get rid of the tax loopholes that allow gigantic corporations to not pay taxes in our state.
12:33 p.m.
Apr 18, '07
Pabst hasn't been brewed in Milwaukee, WI for years.
I have a parallelism problem. Wasn't trying to compare Pabst and Bud to St. Louis and Milwaukee, though I don't know how you could assume otherwise. I actually was thinking of Henry's which was stolen from our downtown by Miller, when I wrote Milwaukee.
Apr 18, '07
I don't like sin taxes in general, and I suspect this one won't gather the necessary majority to pass. One of the few things that people in leftist Portland have in common with the Repubs in rest of the state is that they all drink a lot of beer.
This issue may break along age lines - 30 years ago I would have taken to the streets to oppose an increase in the beer tax, but these days as long as they don't raise the tax on single-malt scotch, I won't get too excited.
Apr 18, '07
I'm in favor of raising the beer tax, but not in favor of spending any of that money on State police, health care, etc.
What?
A higher tax on alcohol will decrease availability of alcohol for youth. We have a serious problem with youth and alcohol here.
But, funding core services with a revenue source you hope will decline doesn't make any sense. Hence my position.
Apr 18, '07
Everyone should pay taxes. A $1 tax per gallon is not going to cause any of our beer companies to close their doors. The increased tax of 6 to 12 cents per glass when passed on to the buyer will not reduce the amount of beer sold.
I think it would also be fair to tax Starbucks, et. al. at a $1 per gallon. We need to fund education, police, health care, etc. in Oregon and since the voters limit property taxes and refuse to have a sales tax, these other taxes are the only way to pay for the services we need.
Apr 18, '07
This is truly a rare occasion when I can agree with the majority of the comments posted on this page.
Why not tax coffee? There is more coffee consumed each day than beer? Why not tax laundry detergent? We all have to wash our clothes. There's no getting around that.
Did anyone read in either the WW or the Trib about the City of Portland tax on businesses that has driven all of the Venture Capital firms out of Portland proper but two? These are the very types of firms you'd like to have in your city. The employ highly compensated staffs that can afford to dine at the swank establishments that the city crows about. They are the very people that buy the new Waterfront Research, err, I mean Waterfront Condos being developed by OHSU.
I believe the article state there were 14 firms prior to the tax.
It is far better to create a friendly business climate that increases the tax base rather. This is not a liberal or conservative problem, it is a Gov't mindset.
1:46 p.m.
Apr 18, '07
The tax needs to be raised. It's unfair NOT to, given the taxes distilleries pay.
If the current setup exempts most Oregon brewers, I don't see how it would hurt the industry. We're talking about pennies per drink--who'd even notice if Bridgeport went from $6.89 to $7.29, assuming they got big enough to face the tax increase?
I drink a pretty fair amount of Oregon beer, so this tax would affect me directly. But you never get anywhere in this country thinking about whether policy is good just for you or not--we're in this together.
2:07 p.m.
Apr 18, '07
There are way too many proposals to make Oregon's taxes more equal than this regressive tax (that would affect this Bud Light drinker). That being said, if it's a regressive tax that hits my pocket book that's better than no additional revenue at all.
2:09 p.m.
Apr 18, '07
Some misconceptions are flying around here, so let's get the facts straight.
Everyone should pay taxes. A $1 tax per gallon is not going to cause any of our beer companies to close their doors. The increased tax of 6 to 12 cents per glass when passed on to the buyer will not reduce the amount of beer sold.
Everyone should pay taxes, and as Oregon businesses, breweries DO pay taxes. What you're talking about is an extra tax--one that distributors and retailers don't pay, even though they also profit from the "sinful" sale of beer. There are variations on who would get taxed what, but to use your analysis, it would in fact shut almost every small brewery in the state. Fortunately, that's not really an issue (the $32 hike would only hit big brewers). Raising the per-barrel tax on beer $30 would represent a profound cost increase--adding something like 30% the cost of producing a barrel of beer.
The tax needs to be raised. It's unfair NOT to, given the taxes distilleries pay.
Uh, that's not really the issue here. I pay more taxes on my house than I used to thanks to Measure 50 [?], so maybe breweries should pay more for that too. Let's stick to the issue.
If the current setup exempts most Oregon brewers, I don't see how it would hurt the industry. We're talking about pennies per drink--who'd even notice if Bridgeport went from $6.89 to $7.29, assuming they got big enough to face the tax increase?
Well, in one version of the legislation, there's a huge tax increase on major breweries, but on others, there's a five-year escalating tax that would take the current tax from $2.60 to $12.40. For small breweries, that represents a serious increase which may or may not be passed along to you. This gets to my first point--it's an excise tax and so the entire burden is placed on the producer. You may be paying more a sixer or not, but it's beside the point because the tax isn't a sales tax. By the time you buy the beer, the brewery's already paid the taxman.
Finally, on that tax hike on big breweries. At 125,000 barrels, a brewery's sales would account for just 4% of the beer sold in Oregon. But on the day a brewery hit the magic number, its tax would go from $845,000 to $4.325 million. Which would cause the breweries to cap their sales locally or go bankrupt.
And for what?
Apr 18, '07
I just don't see how adding an additional burden on local business is an equitable way to pay for these worthy services.
Well said my friend. And let’s not forget the exorbitant city business license Portland charges, along with the completely unjustified Tri-Met tax already levied against all businesses regardless of size, including those with only one employee.
Everyone should pay taxes.
I agree. Unfortunately the current reliance on property and income taxes exempts too many citizens. Elimination of the current system and replacing it with a flat tax or sales tax would be a much more equitable arrangement, but don’t look for that kind of progressive thinking anytime soon.
2:26 p.m.
Apr 18, '07
Jeff, you write:
.Everyone should pay taxes, and as Oregon businesses, breweries DO pay taxes. What you're talking about is an extra tax--one that distributors and retailers don't pay, even though they also profit from the "sinful" sale of beer.
Actually, this sort of tax MIGHT impact distributors and retailers, even if it's initially paid by the brewers. The tax incidence (who pays it) depends on the elasticities of various markets; it may be that the producer shares the burden with the consumer, and the distributor, but not the retailer, etc. It might be that the consumer will absorb it all, and our $3.75 beers become $3.80 (or rather, they'll jump to $4 a bit earlier than they would have without the tax).
As beer prices have gone up recently, we still have great growth in the industry.
I love beer. But I think we have good investments that we could make by bringing our beer taxes more in line with national averages; those investments in alcohol treatment could save us money on things like health care costs, which breweries could benefit from.
Should other alcohols share the burden? Sure.
2:55 p.m.
Apr 18, '07
What you're talking about is an extra tax--one that distributors and retailers don't pay, even though they also profit from the "sinful" sale of beer.
Actually, it will almost certainly boost revenues of distributors and retailers. That's why Paul Romain - and his clients, the distributors - don't put up much of a fight against beer taxes.
Why? Here's the simple answer.
Let's say you add a tax of a nickel a bottle - and you levy it at the brewery. Then brewery then boosts the price by a nickel - and sells it to the distributor.
The distributor does what he always does and doubles the brewery price - raising it a dime. That extra nickel goes in his pocket.
The retailer then buys the beer from the distributor and marks it up again, roughly double, for the consumer. That initial nickel tax has become 20 cents.
Ultimately, the consumer sends a nickel to the state, a nickel to the distributor, and a dime to the retailer.
Of course, Evan is right - it all depends on the elasticity of the pricing at each level. So it's a bit more complex than all that, but the beer market has shown to be a very solid one - even in economic downturns. There's not much elasticity there, especially when it hits all beers equally.
Apr 18, '07
Reading between the lines
The Beverage PAC's support is still very much in play for 2008 elections.
Some things never change.
3:36 p.m.
Apr 18, '07
"Uh, that's not really the issue here. I pay more taxes on my house than I used to thanks to Measure 50 [?], so maybe breweries should pay more for that too. Let's stick to the issue."
That IS the issue--tax fairness on alcohol. The only reason brewers haven't seen a hike in years is due to the power of the beer and wine lobby, one that liquor manufacturers do not currently have. So if it suddenly jumps to $32 a keg, brewers only have their own lobby to blame for preventing regular raises to keep up with the times like everything else.
3:38 p.m.
Apr 18, '07
Or, to contrast what Kari said, maybe you don't pay any of the extra tax and larger breweries use it as a way to kill off smaller ones. Elasticity in a market often means losing the "weaker" players--in this case small brewers like Hair of the Dog. I tried not to get too detailed on the mechanics of the beer biz, but it works to the distributors' advantage. Breweries are not allowed to self-distribute, so they have to go through distributors. The distributors' clients, however, are not breweries, but retailers. They sell what retailers buy. So, if they can offer a keg or a six-pack to a retailer at a discount, it's a business advantage. Bigger breweries can compete more easily in tight markets because of economies of scale. Add a hard cost like an excise tax, and you will eliminate some breweries--or at the very least cut the pay of hard-working brewery workers.
Apr 18, '07
More than just a couple of Oregon brewers already exceed that most extreme of proposals: 125,000 barrels a year, leaving them in league with multi-nationals whose sales international leave them far better suited to absorb a "six to twelve cents a glass" (twenty cents a pint is more accurate) increase, not to mention that they pay squat for taxes, than Oregon brewers who do in fact pay taxes.
This isn't an attack on Joe Sixpack's pocketbook folks, Busch can eat that without blinking. Unfortunately, blink or no, our locals may have to "eat it" as well. Born of the WTF casting about for where we're to go dying throes of the timber game, Oregon brewers have been a steady and solid part of our remarkable recent economic recovery, and in a couple of communities may very well have served as a folcrum for change - for growth.
Out here on The High Desert we have this saying about pissing on those who brung ya', which is about how I'm feeling about having lent my support to the dems this last election cycle. Thanks guys, appreciate it.
Apr 18, '07
"A higher tax on alcohol will decrease availability of alcohol for youth. We have a serious problem with youth and alcohol here."
Higher than anywhere else in the country? I really doubt that.
7:18 p.m.
Apr 18, '07
The rub is that Oregon brewers pay among the lowest excise taxes in the country, and the rate hasn't gone up since 1976.
I know this is a point only a nerd can love but since I know I have plenty of company here...
I cringe when I hear that we need to raise taxes because the "tax rate" hasn't been raised lately. When I hear "tax" I think dollars and when I hear "tax rate" I hear percentage, i.e. if the "tax rate" on income or sales or whatever is 6% then the tax on $100 is $6. Tax rates expressed in percentages have inflation indexing built in and outside of some fundamental change in the world there's no reason a tax rate should be expected to go up over time.
On the other hand, the beer tax having been set at a fixed dollar amount per barrel since 1976 means that the tax rate expressed as a percentage of the cost of the beer has dropped considerably and the value to the state of the tax collected has dropped with it. You might argue that a beer tax is a bad idea, but if you accept the idea of a beer tax at all it's hard to justify why it should be on a steady decline in real dollars over time just as it's hard to justify raising it just because it hasn't gone up in a while.
7:26 p.m.
Apr 18, '07
it's hard to justify why it should be on a steady decline in real dollars over time
Always a pleasure to agree with you, Doretta. And I LOVE Oregon microbrews.
Seems to me if we raise the taxes on out of state industrial beer, while excluding the microbrew industry, we win all the way around.
8:02 p.m.
Apr 18, '07
You probably can't tax out-of-state beer differently than in-state beer -- a violation of the Interstate Commerce Act. But you can almost certainly tax big brewers differently than small brewers. I have no idea if 125,000 barrels would do the trick (Jeff Alworth) or not (Thomas Ware), but there's surely a level.
Frankly, I wouldn't mind NOT taxing little breweries from out of state either. Let's get their beer here! And if the big boys ever re-start a major industrial brewery in Oregon, let's tax 'em.
Apr 18, '07
I'm glad this is being brought up here, because it's an issue I don't fully understand.
Unfortunately this isn't helping me as much as I'd like. Jeff, you first called this a tax raise and then in the comments you called it an "extra" tax. I'm confused now. Is this a completely new tax, or is this a raise of the tax rate for Oregon breweries?
I'd also like clarification on who this tax is levied on. Does this tax affect all companies that brew beer in the state of Oreogn, including out of state companies that brew in Oregon? Do company's even do this? I'm really not that familiar with the issue.
Thanks.
Apr 18, '07
Ditto for me on Frank's comments. As a massive fan of the state's microbrewers I go back and forth on this issue.
I know these are businesses and they certainly have a right to grow, but I have yet to see a brewer go beyond a certain size and not have the quality of their beer go downhill. That seems to be a reality with food-- aesthetic quality isn't scalable beyond a certain point (is it 125,000 gallons a year for beer?--I don't know). Wine, cheese, etc-- it always seems to happen.
So I have my own selfish reasons for wanting to keep our food suppliers smaller. And, certainly, a bill that would add costs to those making more than a specific break point isn't a bad thing to me. One of the issues I have with this country is its emphasis on quantity over quality-- and I think putting the breaks on growth in food industries can help balance that out.
I thought the wine industry in Oregon had a sort of progressive volume tax (still? or at one time?). If so, why not for beer, too?
9:18 p.m.
Apr 18, '07
So I have my own selfish reasons for wanting to keep our food suppliers smaller.
I'm not sure the tax code is a useful tool for regulating beer quality.
Apr 18, '07
And the reason for not taxing alcohol at exactly the same percent as cigarettes is ??? Oh, you don't like cigarettes and you do like alcohol.............
Check the costs of alcohol and cigarettes to the State.
12:02 a.m.
Apr 19, '07
Because there is no safe way to consume a cigarette.
12:03 a.m.
Apr 19, '07
Or, put another way, no one (other than tobacco companies) has ever said "smoking in moderation can be good for you."
Red wine. Compare/contrast.
Apr 19, '07
Let's hear it for the beer tax! If it does nothing but achieve an incremental increase in drunk driving, it will be a sound social decision. Should it also slightly decrease liver sclerosis, that would be a further gain. And close-in residents near college campuses would appreciate any reduction of partying students venting on their lawns.
Apr 19, '07
Let's hear it for the beer tax! If it does nothing but achieve an incremental DECREASE in drunk driving, it will be a sound social decision. Should it also slightly decrease liver sclerosis, that would be a further gain. And close-in residents near college campuses would appreciate any reduction of partying students venting on their lawns.
Apr 19, '07
I'm a Lincoln County Commissioner, a member of the Governor's Council on Alcohol and Drug Programs, and a strong supporter of a beer tax increase. Why?
--Because the tax hasn't been increased in 30 years, since 1977 (I was a high school senior at the time)
--Because when you factor in our lack of a general sales tax, Oregon has the lowest effective beer tax in the nation.
--Because the costs of substance abuse to this state are staggering.
--Sixty percent of all children in foster care are there because their parents have a substance abuse problem.
--Fetal alcohol syndrome among teen mothers alone costs us $12.4 million a year.
--Youth traffic crashes cost $135.7 million a year.
--Our youth drinking rates are far higher that the country's as a whole. Among 8th graders nationally, 17 percent report having consumed alcohol in the past 30 days; in Oregon, it's 32 percent.
--Almost 38-thousand teens in Oregon have a serious drinking problem.
--Numerous studies have shown a provable link between higher alcohol prices and lower teen drinking rates.
--Our funding of prevention and treatment programs in this state has been decimated in the past few years. We now rank 45th overall in access to treatment and 49th for 18 to 25 year olds.
I have no problem with the 85 to 90 percent of adults who drink responsibly. I enjoy the products of our local microbrew myself. But I do have a big problem with children drinking and a state that fails to recognize the horrendous economic and human costs of substance abuse.
8:33 a.m.
Apr 19, '07
More later, but first:
I have no idea if 125,000 barrels would do the trick (Jeff Alworth) or not (Thomas Ware), but there's surely a level.
Some breweries produce more than 125,000 barrels a year (Widmer and Deschutes), but none sell that much in Oregon. The law is written to address only sales in Oregon, not total production.
Apr 19, '07
Bill Hall,
Your points are well-taken and your concern for the costs of alcohol-abuse on our society ring true. However, as Jeff and many commenters point out, kids are not drinking microbrews. If the goal is to increase taxes on what kids are drinking, then target the Buschs, Buds, and Millers of the world. It appears the best (and legal) way to do this is to tax beer that comes from big producers (the number we're seeing is 125,000 barrels a year?). Thoughts?
Alcohol abuse causes problems, but let's target the alcohol being abused.
Apr 19, '07
Jeff,
Thanks for bringing up an important, but grossly misunderstood, topic. The original alcohol excise tax was levied, with the brewers support, to help pay the costs of the Civil War. Since then, brewers have paid this tax (often called a "priviledge tax") on all beer they produce before they get paid for their beer. Tax is paid to the federal government on all beer produced and tax is paid by the brewer to their home state on all beer sold within their state and by the importing wholesaler on all beer sold out of state. Excise tax was never intended as a method to "punish" brewers for producing a legal substance that some people choose to abuse. It is an additional tax paid on top of all business, income and other taxes. It is a business tax and not a consumer tax. so the myth of a "nickle" or a "dime" a drink is just that -- a myth. As a cost of production, this tax gets factored into the markups along every step of the "three-tier" beer distribution chain as Kari Chisholm pointed out. So that nickle grows to at least 15 cents and possibly more. As for the argument that a beer tax will decrease underage drinking, that, too is a myth. Underage drinkers already pay a "tax" on alcohol by paying an older sibling or friend extra to buy for them. And who among us is naive enough to believe an 18-year-old is going to say, "Oh my gosh, a six-pack of beer just went up 60 cents. That does it, no more beer for me."?
Apr 19, '07
Jeff,
Thanks for bringing up an important, but grossly misunderstood, topic. The original alcohol excise tax was levied, with the brewers support, to help pay the costs of the Civil War. Since then, brewers have paid this tax (often called a "priviledge tax") on all beer they produce before they get paid for their beer. Tax is paid to the federal government on all beer produced and tax is paid by the brewer to their home state on all beer sold within their state and by the importing wholesaler on all beer sold out of state. Excise tax was never intended as a method to "punish" brewers for producing a legal substance that some people choose to abuse. It is an additional tax paid on top of all business, income and other taxes. It is a business tax and not a consumer tax. so the myth of a "nickle" or a "dime" a drink is just that -- a myth. As a cost of production, this tax gets factored into the markups along every step of the "three-tier" beer distribution chain as Kari Chisholm pointed out. So that nickle grows to at least 15 cents and possibly more. As for the argument that a beer tax will decrease underage drinking, that, too is a myth. Underage drinkers already pay a "tax" on alcohol by paying an older sibling or friend extra to buy for them. And who among us is naive enough to believe an 18-year-old is going to say, "Oh my gosh, a six-pack of beer just went up 60 cents. That does it, no more beer for me."?
Apr 19, '07
Kari Chisolm said:
Let's say you add a tax of a nickel a bottle - and you levy it at the brewery. Then brewery then boosts the price by a nickel - and sells it to the distributor.
The distributor does what he always does and doubles the brewery price - raising it a dime. That extra nickel goes in his pocket.
The retailer then buys the beer from the distributor and marks it up again, roughly double, for the consumer. That initial nickel tax has become 20 cents.
Ultimately, the consumer sends a nickel to the state, a nickel to the distributor, and a dime to the retailer.
Sorry to be blunt, but you have no clue regarding the cost and profit structure of the beer world. As a retailer we struggle to survive on a 30-33% margin, which means if we pay $1 for a bottle we turn around and sell it for $1.50. This is nowhere near double, and compared to other retail sectors this is a pitiful operating margin. Frankly, to state that we (and the distributors) "double the price" is simply absurd, and I'd ask that you please get your facts straight before throwing out totally inaccurate statistics.
As far as the tax goes, because we're talking about an excise tax on the producer it will have an effect on the price you pay and it'll be a quite a bit more than the "nickel a pint" number that's being bandied about. Taking the most extreme bill (which adds $32/barrel) and breaking it down gives us the following:
1 barrel = 32 gallons = 340 bottles = 56 6pks
This means a tax of $32/bbl = $.094/bottle ($.56/6pk) that the producers must pay. This will get factored into the price they charge the distributor.
The distributors' average markup is about 25%, so then it becomes an increase of $.117/bottle or $.705/6pk.
For the sake of this example, let's say the retailers average margin is 30%. This means an increase of: $.167/btl or $1.00/6pk.
Bar mark-up is considerably higher than normal retail; it's not uncommon for a bar to triple the cost of the keg and base their pint prices on that figure. This means if the price they pay for a keg goes up by $.117/btl ($.156/pint) they are going to increase their asking price for that same pint by $.40-50.
So, there you have it. Your "nickel a pint" tax will actually increase the price of beer by as much as $.50/pint in the bar, or by as much as $1.00/ 6pk in the retail environment.
~Chris @ Belmont Station
12:43 p.m.
Apr 19, '07
Chris, I think your math is wrong. For one thing, you're throwing in a few different proposals. It's a safe bet that none of the beer sold at Belmont Station would come under the $32 per barrel proposal. That affects only breweries selling 125,000 barrels here.
But where I really question your assumption is here: The distributors' average markup is about 25%, so then it becomes an increase of $.117/bottle or $.705/6pk.
You're assuming that the brewer will raise prices and pass them along to the distributor. I'm not sure that's true, and if it's true, I'm not sure they'll raise them uniformly to offset the hard costs they've had to take on with the tax. Breweries have to get through the very narrow (ahem) bottleneck of distributors, who are under no obligation to carry a company's product. This gives larger breweries a huge advantage because they can absorb losses easier through volume.
12:51 p.m.
Apr 19, '07
To Bill Hall: you throw a lot of competing reasons into the mix, but essentially they come down to: 1) we should raise taxes because they haven't been raised in awhile, and 2) due to a number of social ills (enumerated) "I do have a big problem with children drinking and a state that fails to recognize the horrendous economic and human costs of substance abuse."
Your first point is difficult to defend, in my view. Why should breweries have to pay more than any other business in the state? True, taxes were last raised in 1976, but those were additional taxes, over an above regular state taxes. Why, as a matter of taxation, is it fair to treat one business different from another?
On your social ills list, I see a WHOLE LOT of projection about the harms caused by beer. You appear to want to punish brewies because meth-affected babies are abused by their parents. That's absurd, as is dragging "youth traffic crashes" into it. What on earth does beer have to do with a teen who's been distracted by his cell phone while driving?
To the extent you manage to find some ills with alcohol, I'm again going to put the burden of proof on you: what is beer's role in these alcohol-related problems? It's irresponsible to find a statistic and use it to justify a tax without showing causality. If you cite the stat, you must correlate the cause and effect.
1:02 p.m.
Apr 19, '07
Why would distributors mark up a uniform tax? There's no additional cost beyond the increased cost of the beer, so why mark it up? Wouldn't NOT marking it up be the proper economic choice for distributors and retailers seeking greater market share?
Obviously the cost will be passed along--but marked up? Why?
Apr 19, '07
I love micros! Imperial IPAs, Bitters, Dubels, Porters--You name it and I probably have a bottle in my fridge. I've got more Oregon Brewers Festival mugs than I have matching forks in my silverware drawer. And like Bill Hall, the last time they raised the beer tax, I couldn't legally buy a beer even though next year, I'll turn 50.
But I love our state more than I love low taxes and beer. And the state has been drastically underfunded for decades. Which means, at some level, I have to decide whether or not it's ok for me to keep enjoying my $5.99 to $8.29 a six-pack beer, while I watch our education system, law enforcement and physical and natural infrastructure continue to degrade, or whether I'll pony up another 50 cents per pint, or buck a six-pack to enjoy my brewskis (I happen to agree with Chris from Belmont Station's math). Sorry guys, this is a no brainer. Beer prices will go up for lots of reasons. Drought, poor hop crops, increases in wages and transportation costs. And guess what? We'll pay the increase and continue to enjoy our pints. I'd prefer to see us increase the gas tax rather than a beer tax, because the revenues would be greater and the costs distributed more evenly among our citizens (and our guests). But unlike gasoline, you can find a way to avoid the tax.....Brew your own!
Apr 19, '07
Torrid,
Businesses mark up costs to protect operating margins. Part of what places a value on a business for sale is it's operating margin. If you have an operating margin of 10%, you can often command a higher resale value that a business with an 8.5% margin. You might think this is irrelevant. If so, this just proves your ignorance as a socialist.
Take a close look at the quarterly earnings report for Intel yesterday. One of the major items that is scrutinized as a means of placing a value on the stock is the operating (profit) margin. A large or even regional brewer is facing all sorts of one-time, specific costs in the various states it sells into. If it simply ate all of the little costs, margins would shrink and stock valuations would shrink as well. When stock values shrink, foreign companies are more likely to come in and buy US companies out.
I'd rather see taxes applied on art sales and luxury cars in excess of $50,000.
Apr 19, '07
Jerry,
I'm sorry to hear about your drinking problem. But for those of us who actually make a choice to drink, higher prices lead to less consumption.
I used to enjoy a take-home bottle of Hammerhead. But as prices rose from $3.75 to $4.25, I haven't purchased one in 8 months. I refuse to pay more than $6.50/6-pack at the grocery store. It is the litmus test for my purchase. If there aren't any quality micros under that price, I just stick to the milk and eggs.
My decision making is more common than some of you think. If you don't have a guaranteed gov't job with a lifetime pension, you actually have to budget for the posssibility of financial peril. This means not living paycheck to paycheck by ignoring prices and taxes.
Apr 19, '07
Jeff,
First off, let me say I'm not an expert on substance abuse. But in the past couple of years, I've gotten to know a lot of people who are professionals in the prevention and treatment field, as well as many people in recovery, and they've all made one thing very clear: few people with substance abuse issues start out using meth, cocaine (or perscription drugs, for that matter). In the vast majority of cases, alcohol is the gateway.
Second, I did cite statistics directly related to alcohol abuse--teen drinking rates, teen mothers with fetal alcohol syndrome.
Third, you ask why one industry should have to pay an extra tax that others don't pay. My colleague, Terry Thompson (former state representative and lifelong commercial fisherman) put the same question to me. My answer: Because when people consume the product Terry produces, it improves their health. We don't have to put people who eat too many fish into rehab centers. We don't have to treat them in the emergency room or put them in jail. We don't have to teach children about the dangers of eating too much fish. They don't go out on the roads and slaughter innocent people (or themselves).
You may not buy into the statistics I presented, but here's one more: the state now collects one dollar in alcohol taxes for every 39 dollars of alcohol related health costs.
BTW, the Governor's Council supports a comprehensive approach to alcohol taxation. We're supporting SB184, which was part of the governor's budget (but isn't in the co-chair's budget), which would direct two percent of OLCC revenues to prevention and treatment programs.
I sat in on the House Revenue Committee hearing yestereday where the beer tax bills were considered. I heard a mother from Lake Oswego and her teen son talk about an accident the son was involved in a couple of years ago. He and his older brother were headed to the gym to play basketball when a woman who was drunk (2.5 times the legal limit) and high on cocaine plowed into their car. The younger boy was left in a coma but recovered. The older one died. A few minutes later, one of the brewing industry representatives spoke of the "pain" this tax increase would cause them. I wanted to ask her to weigh her pain against that mother's.
Apr 19, '07
Bill,
the stories of tragedy you share may touch the heart, but they make a poor point.
Are you saying that we should just tax beer as we please because of the drunk drivers?
By that logic, we should apply a special tax on people who display poor judgement. Most accidents are not caused by drunk drivers, but rather, people choosing not to pay attention to the task of driving. Therefore, anyone who picks up food through a drive thru window should pay a special "oblivious tax".
When you're trying to stuff that big burrito in your mouth, it is tough to see the car stopping ahead of you. Crash!
Ditto for people who turn around to lecture their children. Ya, a special child tax. As soon as you purchase a booster seat, you have to pay a one time tax and annual renewal tax.
Apr 19, '07
touche' Dan, although I said I like, not that I need-beer. oxygen, shelter, clean water--those I need. BTW-Assuming that inflation doesn't disappear and that your $6.50 price ceiling is inelastic, I'd recommend Miser Mondays at the SE Lucky Lab. Your best bet at staying under $6.50 might be dock sales.
PS: What makes you think I have a gov't job or a lifetime pension? I've moved through more careers than I care to think about and almost all were commission or bonus dependent. While living paycheck-to-paycheck is a real problem for most Oregonians including our state government, it is not a defacto admission of tax or financial ignorance (or negligence).