Brewing Beer is Not a Sin
For the past couple weeks or so, Oregon's beer drinkers have been following with anxiety a proposed law to tax their beloved IPAs. I've been avoiding the temptation to write about it because my sense is that the offending piece of legislation--HB 2461--is really just a starting place. It seemed prudent to see what emerged before I started protesting too loudly. Today's front-page story on the Oregonian forces my hand, though.
Very briefly, here's the nut of the issue: Oregon has one of the lowest beer taxes in the country at $2.60 a barrel (a keg is half a barrel). Every session, Dems eyeball this as a potential revenue target, and every session, they battle to get something passed. Bizarrely, instead of trying to raise the tax modestly, to the national mean of around $8, say, they go for a massive hike. This year's version would raise the tax to $49.61, a nearly 2000% increase that, unlike last session's proposal, would tax every drop produced, even by Oregon craft breweries.
Although the language used to promote the bill refers to the hike in terms of a per-beer increase, the effects are far different (even the estimable Janie Har, who wrote today's otherwise excellent piece, falls into this trap). In the beer ecosystem, a number of groups make a buck off beer--the distributors who by law ferry beer to retailers, and the pubs and grocery stores who sell them to the public. But this tax targets only breweries, the link in the chain with the smallest margins and least pricing flexibility. The per-beer increase backers of the bill constantly cite is actually wild-ass guestimate about the downstream costs to the public, not actual data.
There are a number of reasons why this is ill-conceived legislation, but I'll highlight the greatest hits:
- It would damage breweries in different ways. Brewpubs, who retail their own beer, could absorb the hits more easily than bottling breweries. Bigger breweries, who efficiencies of scale, would have advantages over smaller breweries. Don't think Widmer vs Hair of the Dog, though, think Anheuser-Busch versus Oregon craft breweries.
- The bill isn't designed to off-set costs to the state beer might cause; rather, the revenue would also fund drug abuse and prevention, and drug and alcohol program for inmates.
- Of the neighboring states--which, when combined with Oregon constitute almost the whole market for Oregon beer--none has a tax higher than $8.08 a barrel. This bill would create a perverse incentive by encouraging Oregon breweries to sell their beer elsewhere.
It is perfectly reasonable for a state to recoup costs from industry. We tax drivers to pay for roads and smokers to pay for health care. But nowhere in this bill is any reasonable attempt made to link the potential cost of the activity with the tax. In fact, the tax pays for things explicitly unrelated to the activity. There are costs for alcoholism, teen drinking, and traffic accidents related to alcohol. But how many of these are caused by beer? And how many of the beer-caused problems are caused by locally-brewed beer? (One imagines that 18-year-olds are not picking up cases of Ninkasi for their illicit parties.) And finally, one has to ask the question why the bill targets only one portion in the chain of businesses earning money on beer.
The one thing left to conclude is that this is some kind of moral stand against beer, an intentional effort to damage the industry. Sinners taxed to reduce the sin, not its cost. I can't see any other purpose here. As good liberals, we consider how solutions like taxation will solve certain problems. This bill has no clear idea what the problem even is, much less what the cause might be. Worse, the effect would be to crush local business and damage a beloved part of local culture. I can imagine reasonable ways in which the state assesses the cost of alcohol, determines who's responsible for reimbursing the state for this cost, and decides what a reasonable tax would be. House Bill 2461 is none of these things.
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February 16, 2009 |
Jeff Alworth | Comments (170 so far)
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Comments
Posted by: Sal Peralta | Feb 16, 2009 9:31:47 AM
Jeff,
I strongly disagree with your suggestion that Ben Cannon and the other legislators who have put forward this proposal (Rosenbaum, Morrissette, Dingfelder, Dembrow) are taking a moral stance against beer or that the proposal itself is ill-considered.
I would expect that kind of ad hominem from a industry lobbyist, not from a self-styled progressive.
The initial proposal is likely a starting point for negotiations that are intended to help backfill a state revenue shortfall that is in the billions and counting.
The fact that you are poisoning the well on day #1 makes me wonder what your priorities are, and whether you have any real concern for the thousands of people who will be affected by the loss of services and school days that is going to come down on this state like the hammer of the gods in the next biennium.
Talk about fiddling while Rome burns.
Posted by: fred | Feb 16, 2009 9:35:17 AM
One would have to hope that Oregon's lawmakers wouldn't strike to kill an industry (a local industry at that) in the midst of a decession/repression/"economic downturn."
Posted by: BILLB | Feb 16, 2009 9:40:19 AM
J , Well Reasoned and thought provoking.
As an avid Micro Drinker [go Lucky Lab]
I see the local brewers and servers work
hard every day to make a high quality product and experience. If we want to tax 'sins' then lets start with MacDonalds.
The health costs of society are often related to over-weight issues.
Posted by: joel dan walls | Feb 16, 2009 9:46:43 AM
I agree that the tax is ill-conceived for the reason pointed out by Mr. Alworth: namely, that it's a tax on breweries.
I will also point out that taxes on alcohol in other countries are commonly far greater than in the US (just as with taxes on gasoline). Whatever....
I think we all know why this brewery tax is being proposed: because the state needs $$ and there's a lingering mentality of "drinking alcohol is a sin." (And BTW, Sal Peralta is simply wrong about Alworth allegedly engaging in ad hominem attacks on this point. Peralta has an overheated imagination.) Progressives rightly complain about regressive taxes like a sales tax, but this brewery tax strikes me as no better.
As for me, I'll continue brewing at home ;-)
Posted by: joel dan walls | Feb 16, 2009 9:46:44 AM
I agree that the tax is ill-conceived for the reason pointed out by Mr. Alworth: namely, that it's a tax on breweries.
I will also point out that taxes on alcohol in other countries are commonly far greater than in the US (just as with taxes on gasoline). Whatever....
I think we all know why this brewery tax is being proposed: because the state needs $$ and there's a lingering mentality of "drinking alcohol is a sin." (And BTW, Sal Peralta is simply wrong about Alworth allegedly engaging in ad hominem attacks on this point. Peralta has an overheated imagination.) Progressives rightly complain about regressive taxes like a sales tax, but this brewery tax strikes me as no better.
As for me, I'll continue brewing at home ;-)
Posted by: Ben | Feb 16, 2009 9:55:49 AM
It's not that there is an increase on the table that is the problem. I seriously believe a move from $2.60 to, say, $5.20 might be grumbled about but it would have a better chance of acceptance and would also be looked at in a much, much different light than this kind of overreach.
Seriously, what's the gameplan here? Ask for a 1900% increase so you can negotiate to 850%, say you met the opposition halfway, and then still end up with triple the tax of any other western state? I really don't think the sponsors thought this through. It feels like they wanted 'x' as a final number and worked their way backward to figure out what kind of increase would be needed for 'x'.
Posted by: Sal Peralta | Feb 16, 2009 10:12:54 AM
Joel - The rhetoric in my previous comment may have been overheated, but this is an issue that we should be heated about. Taking shots from the sidelines at some very conscientious people for trying to figure out ways to address our state's revenue shortfall is highly ill-considered given the realities that we are facing.
And yes, I do believe that suggesting that people who support this proposal are using the tax code to harm an industry they don't like for moral reasons is ad hominem.
If anything boggles the imagination, it is Jeff's suggestion that no attempt to link costs associated with drinking right before he cites the things the bill does attempt to address -- alcoholism, drunk driving, and teen drinking. The same is true for his implication that the language of the bill somehow targets small micro-breweries as opposed to all manufacturers.
Posted by: Jeff Alworth | Feb 16, 2009 10:20:32 AM
Tom, thanks for the very kind words.
Sal:
I strongly disagree with your suggestion that Ben Cannon and the other legislators who have put forward this proposal (Rosenbaum, Morrissette, Dingfelder, Dembrow) are taking a moral stance against beer or that the proposal itself is ill-considered.
I would expect that kind of ad hominem from a industry lobbyist, not from a self-styled progressive.
I specifically left names and intentions out of this. You can't really have an ad hom attack without the hom. My comment was based on looking at what the tax is, what it's designed to do, and whom it taxes. I can actually see no rationale except that it's a blunt-force sin tax. I welcome any clarification from the sponsors.
The initial proposal is likely a starting point for negotiations that are intended to help backfill a state revenue shortfall that is in the billions and counting.
I noted that in the post.
The fact that you are poisoning the well on day #1 makes me wonder what your priorities are, and whether you have any real concern for the thousands of people who will be affected by the loss of services and school days that is going to come down on this state like the hammer of the gods in the next biennium.
This is not day one. Day one was when legislators introduced the bill. I wouldn't have posted this except for the Oregonian piece. In fact, I even resisted the temptation to use next Monday's open hearing (8:30 am, Hearing Room A, Oregon Capitol) as a springboard for mentioning it here.
My agenda as a fan of Oregon beer has been clear since I started writing about it more than a decade ago. You mention that you're concerned about school days and the loss of social services, but this bill has nothing to do with those. The funds wouldn't go to schools or DHS in any case. This is not a zero-sum discussion. So what's your agenda?
Posted by: Bill R. | Feb 16, 2009 10:26:42 AM
The data is overwhelming. Alcohol consumption is a social ill that destroys families and incomes. It brings death and destruction on the highway, divorce and domestic violence at home. Alcohol consumption is at the root of a whole host of disabling and sometimes fatal diseases, from diabetes, cardiovacular disease, to dementia. We all pay a terrible price for the use and abuse of alcohol. This is not about sin, it is about an addictive and incapacitating drug, alcohol. It is only right that alcohol producers and consumers should pay for at least some of the social cost of their actions, in this case, treatment for alcohol addicts. As President Obama said, our challenge is to begin a new era of responsibility, and taxing those who inflict harm on the larger community is right and proper.
Posted by: Kurt Chapman | Feb 16, 2009 11:06:19 AM
Jeff, thanks for the excellent write-up. As soon as I heard of this nefarious scheme to run craft brewers out of the state I was awiting your report. Sal, per usual is dead wrong. By raisding a tax by 2000%, the Oregon legislature is directly attacking a small industry that provides family wage jobs AND a good product.
If allowed to get away withthis I forsee the brewers simply pulling up stakes and moving across the Columbia ans Snake to friendlier states. Now that would be what should happen if a stupid scheme such as this goes forward.
Posted by: Eric Berg | Feb 16, 2009 11:20:41 AM
Enrolling in a public college is not is not a sin. Fishing and hunting are not sins. Driving a car is not a sin. Recreating in a state park is not a sin.
Yet the Oregon legislature has raised the cost of doing those and other things many, many times over the past 30 years. The beer tax hasn't been touched.
I agree a jump to nearly $50 a barrel is excessive. But it's time for brewers, vintners and drinkers (I heart beer) to step up and support a modest and needed increase in the beer and wine tax. How about something along the lines of five cents per serving?
Posted by: alcatross | Feb 16, 2009 11:21:41 AM
Sal says: The initial proposal is likely a starting point for negotiations that are intended to help backfill a state revenue shortfall that is in the billions and counting.
I'm too a non-drinker - but I agree raising this tax to a level commensurate with other states doesn't seem unreasonable.
However, the primary reason there is a state revenue shortfall in Oregon is because there's a taxpayer income shortfall. Our Oregon state government finding ever new ways to take more of less is highly ill-considered given the realities we are facing.
Many if not most Oregonians are having to tighten their belts - Oregon state government is going to have to do the same (meaning REAL $ reductions in spending - not just reductions in the GROWTH of spending...)
Posted by: DJ | Feb 16, 2009 11:30:02 AM
As soon as talk of beer tax hit the news I began to anticipate another common sense post from Jeff - and he delivered. Jeff makes the case for why this tax is ill-conceived and will damage the craft brew industry.
The Beeronomics link Jeff provided cites a figure of 5,000 Oregon jobs directly tied to craft brew. Including indirect jobs the figure is far higher...just ask a craft brew professional who it is that grows their hops (hint, OR is the #2 hops producer in the US) or who the owners of Portland's 30 breweries have in their collective 'Rolodex' (electrician...accountant...TV/radio/newspaper ad exec...truck mechanic...event caterer...the folks who maintain the roof...maybe the guy living next to you fighting a foreclosure).
Unlike Jeff, however, I don't conclude, "that this is some kind of moral stand against beer, an intentional effort to damage the industry." Somehow, Dems long ago convinced themselves that higher taxes are not an impediment to economic development or to attracting business and entrepreneurial risk taking. If Dem legislators are sincere in that belief, then it does not follow that they intend a moral statement or to damage craft brew. This isn't a crusade on their part, it's just a grab for revenue and a glaring example of naivety and unintended consequences.
Jeff correctly questions the link between craft brew and societal costs. Eliminate all craft brew, and PBR will still be there to maintain the beer related societal woes one might attribute. But sin tax or not, this debate goes far beyond craft brew. Taxes don't discriminate between "sinful and non-sinful" industries, their effective result is the same. Despite what Dem legislators believe, if you want to discourage, hurt, or kill just about anything - taxing it is a good way to start.
PS: for those who still believe the legislature has alcohol treatment as a priority, please explain why only 5.09% of current Oregon beer, wine and liquor tax net revenues actually are earmarked for mental health, alcohol and drug treatment programs. Source: Oregon Liquor Control Commission Data for the Mental Health, Alcohol and Drug Services Account in 2008
Posted by: joel dan walls | Feb 16, 2009 11:34:46 AM
Bill R writes: Alcohol consumption is a social ill that destroys families and incomes. It brings death and destruction on the highway, divorce and domestic violence at home. Alcohol consumption is at the root of a whole host of disabling and sometimes fatal diseases, from diabetes, cardiovacular disease, to dementia. We all pay a terrible price for the use and abuse of alcohol. This is not about sin, it is about an addictive and incapacitating drug, alcohol.
My glass of beer or wine 2 or 3 times a week is responsible for all that? Jeez Louise. Folks, I'm reluctant to stray into GOP-sounding territory, but good lord, at some point we've got to talk about personal responsibility.
Posted by: Betz | Feb 16, 2009 11:37:59 AM
Jeff,
A very well written, and insightful, article. Nice work!
I am a little bit skeptical about your conclusion, however, that this is just a blunt-force sin tax. I just find it hard to believe that we have some hard-nosed, traditional-valued, prohibitionist legislators proposing these bills. Instead, I think its more likely that legislators are eyeballing the growing defecits and, flailing to come up with something they can tax for cash, start to point at the beer tax - the lowest in the nation. I am at a loss, though, that they somehow thought that a 1900% increase in the tax was considered reasonable. Instead, I think that this might have just been a poorly thought out bill rather than a moral stance against beer and/or "sin" (The implication "beer/alcohol = sin" is highly debatable, so I'm not even going to address it here besides a simple statement of "I disagree").
Sal,
Your concerns about the loss of services and school days are real, although I wonder about the effects that passing this bill would do. Oregon has a very well-renowned beer culture: Portland itself has more breweries than any other city in the world, and has been voted by many newspapers as producing some of the best quality beers around. I believe that the Oregonian article is correct in its statement that a per-barrel tax-hike from $2.60 to nearly $50 would result in layoffs in the industry. I also think it would be very likely that some breweries, or those interested in starting a brewery, might consider neighboring states for their base of business to avoid the tax hike. You sort of pick your poison, so to speak: job and industry losses vs. government service losses. I think of myself as a market-oriented person, and would generally side with the breweries and business-owners on this issue, particularly because, as Alworth points out, the services that the tax would pay for has nothing to do with beer-production at all. In fact, it is just as arguable that those services could be funded via other taxes or cuts elsewhere in government. Hurting the beer industry, IMO, would be a very damaging action for Oregon legislators to do.
Bill R.,
I also believe in this new age of responsibility; starting with individuals being responsible for their own actions, and not trying to pass their own problems with controlling their alcohol consumption onto breweries just because they make beer.
Posted by: Scott J | Feb 16, 2009 11:39:01 AM
As always, Jeff's posts are some of the most objective and well thought out, even if I disagree with most of them.
On this, I agree completely.
There is a better way to cover the costs of alchohol related problems.
This bill is nothing more than an jobs transfer bill; transfer of jobs out of state. For brewers like Widmer, that have production facilities out of state, they can simply shift production capacity over time.
Other brewers will choose to set up shop in Vancouver.
Finally, does anyone remember what happened when the City of Portland imposed its' tax on venture capital firms?
They all left and the net tax revenue was a negative outcome from before the tax was put in place.
People make choices and will not just sit back and take it!
Posted by: John Calhoun | Feb 16, 2009 11:44:06 AM
Jeff, I want to add my thanks for a great analysis. This is a perfect example of why I read Blue Oregon, because I cannot ever get this quality analysis out of the Oregonian. It is really sad that they are institutionally incapable of doing this.
Having said that, I believe that we should have a higher tax on beer to help fund government. I say this as an avid micro beer drinker. At the same time I was more than a little astounded at the size of the increase proposed by the legislature. One-third of that would be more reasonable. (A nickle a bottle or $.30 per six pack.) The blow-back of a major tax increase will insure that nothing gets passed or if it does there will be long-term damage to Democrats. A modest increase will be accepted by all but the breweries, their lobbyists, and the anti-government die-hards. In addition, the form of the tax should be done in a way that does not put local brewers at a disadvantage to the national brewers.
As for the problem of alcohol, I expect that there are very few that drown their sorrows in beer. It takes too long and is too filling. "According to a new study, moderate consumption of beer has more health benefits than red wine. University of Texas Southwestern Dr. Norman Kaplan explained to The Early Show what the findings mean. Kaplan says beer in moderation can deliver protection against heart attacks, stroke, hypertension, diabetes and dementia."
Posted by: DanOregon | Feb 16, 2009 11:46:22 AM
This bill is like taxing Gortex and trail mix to pay for the rescue operations of people that get stuck on Mt. Hood or lost in the forests.
Hey!
Posted by: ws | Feb 16, 2009 11:47:34 AM
"Alcohol consumption is a social ill that destroys families and incomes." Bill R
Add 'excessive' to that phrase, and I'd agree with the statement. This isn't meth or crack we're talking about. Drinking a good beer is not likely to destroy the family. Good beer is already plenty expensive.
If the morally rigid want to attack beer that contributes to drunkenness and alcoholism, they should go after bland and cheap stuff such as PBR. While they're at it, they should attach a big heaping tax on box wine. Think about that when you pass by your friendly drunk punks sitting outside nearly everyday, spare-changing in front of the Rite-Aid on SW 6th downtown, the proceeds from which they walk directly into the store to buy themselves a box of wine or a couple 12 packs of cheap beer.
Posted by: Jamais Vu | Feb 16, 2009 12:05:04 PM
I don't think drinking is a sin, but it is a luxury and as such is a reasonable place to look for enhancing revenues.
I agree with Jeff that a tax only on breweries is grossly unfair. Instead, I'd advocate an across-the-board tax increase on every retail sale of alcohol. I find it difficult to believe that even a huge percentage increase--say 25 cents a bottle/glass--would have any impact on consumption. Another quarter a drink would be a $1.00 increase for the price of 4 beers. There's no way that is going to break a whole industry.
Putting a tax of at least a dime on every bottle, can or glass of beer sold retail is long overdue and I hope the legislature finds the guts to do it. (It would be even better if the money went into the general fund instead of all being ear-marked for treatment programs.)
Posted by: torridjoe | Feb 16, 2009 12:29:56 PM
The breweries are the ones that make the beer. Hops do not incur massive social costs. Neither does yeast, and we already tax the distributors and retail stores.
I find it very hard to believe that a floor will not be placed on this tax, to minimize the harm to either smaller brewers or small Oregon brewers. The Widmer Brothers can hack it, I think.
I have to laugh at this:
"In fact, the tax pays for things explicitly unrelated to the activity. There are costs for alcoholism, teen drinking, and traffic accidents related to alcohol."
So it pays for things unrelated to alcohol--except for when it's directly related to alcohol? Gotcha.
The bottom line is that raising excise taxes cuts public health costs and saves lives. Here's a long-term Alaskan study that makes those points. I believe the per-drink (or is it per dollar?) state health cost of alcohol is about $30, dwarfing the $11 cost of cigarettes.
There are many millions of dollars in public health costs being borne by people who can't afford it--I find their stories more compelling than the pain claimed by beer drinkers, of which I am a loyal member of the club.
Posted by: torridjoe | Feb 16, 2009 12:31:09 PM
And now I lost the link. A long-term Alaskan study indicated when you raise excise taxes on alcohol, you save lives.
http://opblog.wordpress.com/2008/11/13/alaskan-study-super-argument-for-oregon-beer-tax-hike/
Posted by: Jeff Alworth | Feb 16, 2009 1:03:27 PM
A long-term Alaskan study indicated when you raise excise taxes on alcohol, you save lives.
TJ, this isn't really relevant. It's beside the point--so much so that it doesn't even appear in the bill. I'm sure you could save more lives by banning alcohol outright. But that's true of cars and cheeseburgers as well. Unless there's a Pigouvian rationale, I'm more than leery of government taxing behavior of which it disapproves.
For others who have complimented the article, thanks much. It's great to be hear. (I may have to post something really short-sighted and polemical soon so as to drive expectations back down,though.)
Posted by: Eric Parker | Feb 16, 2009 1:16:04 PM
I propose we pass the tax anyway and let those like Jeff to get a lackey lawyer if they feel victimized by the tax. I get sick of people like Jeff who bitch about how it is hurting them when it seems logical to tax something that you shouldn't be doing anyway. It is not relly hurting you, Jeff, so why bitch about it.
Besides, when you make this expensive and not affordable any longer, you eliminate the urge to drink out of boredom - which is why we have a problem with alcohol and any other drugs. People get drunk or do drugs because they are so bored to the point they need something to do with themselves and thier spare time. It is not a desease, it is an act out of boredom. A tax is the only way to keep the item they use for thier bordom out of thier hands by making it unobtainable for them to use.
Drinking is not a constructive habit in the first place. By bitching about taxing the alcohol is just encouraging the habit of drinking to fester and become worse than it already is.
Just tax it all now and deal with the bitching people who feel slighted in the courts later.
Posted by: Jeff Alworth | Feb 16, 2009 1:23:31 PM
I nominate Eric Parker to do the PR for HB 2461. This should really lead all talking points in favor of the bill.
Posted by: torridjoe | Feb 16, 2009 1:40:07 PM
"I'm sure you could save more lives by banning alcohol outright. But that's true of cars and cheeseburgers as well. Unless there's a Pigouvian rationale, I'm more than leery of government taxing behavior of which it disapproves."
That's a pretty big strawman there Jeff--keep the matches away! There's a wide gap between banning products, and regulating their sale, in part to recover social costs associated with their sale. It has much less to do with disapproval than social equity, something which ordinarily I know you're concerned about.
Why are you leery of government taxing something that costs all of us a shitload of money and misery, in order to recover as many of those costs and reduce that misery as much as possible? Especially when there are no shortage of examples that it WORKS?
I'm on the side of beer. Yaaaay beer! It's probably top 5 of the best things about Oregon. And I've already said that while I wouldn't oppose some increase in the tax rate affecting all sales, a craft-brewing/small-brewing adjustment is a great idea. We can avoid much of the pain to local brewers and small brewers--and their associated businesses...but even in Oregon that leaves an awful lot of beer that's running on 30 year old rates.
What I'm more leery of is ending up on the side of the distributor and restaurant lobbies on any issue--they almost never seem to have the state's best interests at heart--nor sometimes even the people you champion in this article and who probably pay nice membership fees to have their interests served by them, sadly.
Posted by: paul g. | Feb 16, 2009 1:45:46 PM
Jeff
Would you support an increase to $8.08 / barrel?
I don't understand the amount of the tax increase, other than relatively easy revenue. It doesn't seem unreasonable to me to raise the tax, though. We're in a budget crisis.
By the way, most misleading comment from the O story has to be this one from Kurt Widmer:
Kurt Widmer, one of the brothers behind Widmer Brothers Brewing, says the actual tax paid by drinkers will be much higher than legislators claim, after middlemen slice their share.
"The lie of the 15 cents is that a pint (actually) goes from $4 to $5.50," he says.
Huh? Kurt needs a refresher in Econ 101.
Posted by: Jamais Vu | Feb 16, 2009 1:51:13 PM
Given the need to revenue, what kind of beer tax would you support, Jeff? I think we all agree the current tax is ridiculously low for a non-essential item. Even without designating money to social programs directly related to alcohol abuse, a consumption tax on alcohol could raise a lot of money without shrinking demand if done right. I think my proposed 10 cents a glass as a consumption tax is a reasonable starting point; I'd be interested in your thoughts to something along those lines.
Posted by: Scott Sanders | Feb 16, 2009 1:51:17 PM
I second that nomination.
Re: Posted by: torridjoe | Feb 16, 2009 12:29:56 PM
....The Widmer Brothers can hack it, I think.
The company would probably survive, but when considering the effects of this on his business, such as laying off a number family wage earning employees, I have heard Rob Widmer describe this tax as, "Frightening."
Not that there is ever a good time to attempt to tax a vital industry out of existence, but especially now, I agree with Jeff that "this is ill-conceived legislation."
Nice work on this, Jeff.
Posted by: Betz | Feb 16, 2009 1:57:04 PM
@Eric Parker,
"It is not relly hurting you, Jeff, so why bitch about it."
First and foremost, the tax probably would hurt beer drinkers. As Kurt Widmer mentioned in the Oregonian piece, he suggests that the ultimate price might fall higher than congressmen expect - as every particle in the entire beer-economy will need to recoup their expenses from the increased cost the breweries incur because of the tax. Breweries will need to raise prices on their beer to cover costs, distributors will raise prices in ferrying, grocers and pubs will then follow suit to recoup their expenses - it is a ripple effect. I think it entirely plausible to think that the average cost of a pint might increase from $4.00 to $5.50 instead of the proposed $0.20 increase, or however much it is. It has the potential to effect alot of Oregonian beer drinkers, which, I believe you will find, is a majority.
But more importantly, looking at your statement a little closer reveals a stunning implication - why would anyone feel it the right thing to do to cry foul when government unfairly targets a group of people, even if you don't belong to the targeted group? I find that an incredibly ironic statement to make, this being Black History month and all.
Posted by: Eric Parker | Feb 16, 2009 1:58:11 PM
"What I'm more leery of is ending up on the side of the distributor and restaurant lobbies on any issue--"
So what.
Just because they have an attitude, does not mean you have to be timid to encourage that attitude. Just pass the legislation, tell them to bugger off, and let the courts sort it out. We need action - not compromise.
Posted by: Christy Splitt | Feb 16, 2009 1:59:54 PM
This is Christy, Rep. Ben Cannon's legislative aide. The representative in in committee now and has been with school funding advocates most of the day. The Capitol steps were filled with parents and kids today, which I wish were the big news here in the blogosphere. Since he can't respond point by point to Jeff's original post, I thought I would share what we have been sending out to those who have emailed us in opposition to House Bill 2461.
"Thank you for your email regarding HB 2461, which would increase Oregon's tax on beer in order to fund addiction treatment, recovery, and prevention services.
Currently, Oregonians pay the lowest tax on beer in the nation. Beer drinkers pay a fraction of a penny on each glass they purchase. To me, a beer drinker myself, 15 cents per beer seems like a fair amount to pay - if that money is earmarked for alcohol and drug related addiction and prevention services.
In drafting this bill, I chose 15 cents in order to illustrate the need. Measure 57's addiction treatment component is estimated to cost $48 million per bienium. We are currently $137 million short of fully funding addiction treatment and recovery programs - and further, drastic cuts are on the horizon for these programs. I believe a 15 cent increase would have a negligible effect on sales. But recognizing the possibility, I have opened to the door to the beer industry to talk about that amount. Should it be lower? Should it be 10 cents a glass? 7 cents a glass? Should a wine tax increase be included as well? Almost all of the emails that I have received from folks like you agree with me that a fraction of a penny is just not enough. For over 30 years, powerful corporate lobbyists who represent the beer distributors, Anheuser-Busch, and big tobacco, have fought increasing the beer tax at all.
Many of you have written to me about protecting craft breweries here in Oregon. Again, I am a beer drinker and prefer Oregon beer every time. In the past, beer tax proposals have come with an exemption for microbrews. The Brewer's Guild opposes the tax even with the exemption. I met with a great group of brewers a few weeks ago. I asked them for their ideas about how to increase the tax on beer in a way that protects them. What if we kicked back a tax credit? What if we changed the beer distribution system, which functions in a way that allows for profits to be made off of the tax? I look forward to continuing that discussion with Oregon's brewers.
HB 2461 is a starting point for a conversation that Oregonians must have. 85% of all property crimes are committed by a drug addicted person. At least 55% of all children taken from their families by the state had a drug or alcohol addicted person in the home. 477 Oregonians died in drunk driving related accidents in 2006. Untreated substance abuse costs Oregon $5.93 billion each year. I support dedicated funding for programs that will help decrease these numbers.
Your advocacy is important and I appreciate it, even if we disagree on this one.
-ben
Ben Cannon
State Representative - House District 46
www.repbencannon.com"
Posted by: torridjoe | Feb 16, 2009 2:02:29 PM
"The company would probably survive, but when considering the effects of this on his business, such as laying off a number family wage earning employees, I have heard Rob Widmer describe this tax as, "Frightening.""
Where are his numbers? Especially in the craft beer sector, where the market is already middle class and above and where devotion to beerdrinking as an avocation is much stronger than average? I know a five dollar pint in some places doesn't cause me to opt for water now; why after the tax?
Would he like a 10,000bbl credit on the tax? Would that do it? Are there any answers other than "No" here?
Posted by: Eric Parker | Feb 16, 2009 2:05:08 PM
"First and foremost, the tax probably would hurt beer drinkers. As Kurt Widmer mentioned in the Oregonian piece, he suggests that the ultimate price might fall higher than congressmen expect"
Then maybe...just matbe...you shouldn't drink beer at all. If you didn't drink beer, then you wouldn't "suffer".
Tea is huch healthier anyway, and you can drive home after a nice glass of Tea.
Posted by: torridjoe | Feb 16, 2009 2:15:00 PM
You know, Christy brings up an excellent point by posting their reply letter: this was proposed by Ben Cannon. BEN CANNON, for heaven's sake! Doesn't he get a little benefit of the doubt for being reasonable and smart, and likely not crafting a rigid, painful bill for no reason other than moral sanctimony? If you agree the tax is nationally quite low and long out of date, that's the starting point for the discussion. Instead of doomsday scenarios, what's the proper scheme?
I also hear a subtle difference in a 15c rise, and a rise TO 15c, from a fraction of a penny. On an integer basis there's no difference, but if the rate is increased multiple times within a single cent's worth of tax on a glass of beer, there's a hidden multiplier on the effects. It's not clear from the letter--was the 15c increase the starting point of figuring the impact, or just the per-glass derivation from the per-bbl number?
Posted by: Jeff Alworth | Feb 16, 2009 2:16:09 PM
Would you support an increase to $8.08 / barrel?
and
Given the need to revenue, what kind of beer tax would you support, Jeff?
The short answer to Paul's question--yes. And to JV, I'd say that I could, in the spirit of compromise, agree with a small hike. I'd prefer one that exempted the first 100,000 barrels or used some other mechanism that would protect smaller breweries, but I could live with a modest hike. (This may not be the position of the Oregon Brewers Guild.)
But that doesn't mean I agree with a number of assumptions the backers hold. Brewers already pay thousands of dollars in state tax over and above other businesses. In a state where multinational corporations pay nothing, I find the moral outrage against brewers a little rich. Local breweries are the model of civic-minded citizens, and its in this spirit that they would accept a modest hike. But let's recognize that even now they pay well more than their fair share.
I also reject the idea that local breweries are much of a drain on society. I think that very few alcoholics rely on expensive microbrew; very few teens are tempted by microbrew; and only a small number of alcohol-related deaths are caused by microbrews. I chafe at the idea that there's a moral equivalency about all alcohol. Local breweries help cultivate an attitude of responsibility toward alcohol; their pubs are family-friendly and don't encourage drunkenness. These aren't the producers of Night Train or cheap gin.
Finally, if we're all being honest about the costs of alcohol, we have to recognize that modest beer consumption actually benefits the body. Where I find the tenor of the argument turns away from fact and honest disclosure is when this fact is brought up. Unlike cigarettes, which have no redeeming health value, beer is actually good for you. If we're weighing the costs to society and being honest about them, this should be in the picture.
Which brings me to a comment on Christy's post...
Posted by: Sal Peralta | Feb 16, 2009 2:19:19 PM
I also think it would be very likely that some breweries, or those interested in starting a brewery, might consider neighboring states for their base of business to avoid the tax hike.
I doubt it. We have local breweries in Portland because there is a strong local demand for what they produce. Lucky Lab can always relocate to Vancouver, but they will lose the litany of the trendy 30-somethings they attract by being in Portland.
I don't believe that my beloved Golden Valley Brewpub, nor Deschutes Brewery will be leaving McMinville or Bend any time soon, with or without the tax.
As to this business about how taxes drive companies away...
My own company is located in Portland, even though we could pay lower taxes by taking the business outside of metro, because that's where our labor force is.
The point being that taxes are just one of several criteria businesses evaluate when deciding to locate in a community. It is nowhere near as determinative as some folks in this thread -- many of whom have probably never actually run a business -- would like to pretend.
Posted by: edblatch | Feb 16, 2009 2:26:36 PM
HB 2461 is a starting point for a conversation that Oregonians must have. 85% of all property crimes are committed by a drug addicted person. At least 55% of all children taken from their families by the state had a drug or alcohol addicted person in the home....Untreated substance abuse costs Oregon $5.93 billion each year. I support dedicated funding for programs that will help decrease these numbers.
The quid pro quo between beer and drug abuse, as described in Rep. Cannon's email, seems incredibly dubious to me. The idea to raise taxes seems defensible, but this is a bad way to defend it.
Posted by: Jeff Alworth | Feb 16, 2009 2:27:42 PM
85% of all property crimes are committed by a drug addicted person. At least 55% of all children taken from their families by the state had a drug or alcohol addicted person in the home. 477 Oregonians died in drunk driving related accidents in 2006. Untreated substance abuse costs Oregon $5.93 billion each year.
Ben, I share your interest in having this conversation, but data like these seem disingenuous at best. Why are you asking Oregon breweries to pick up the tab for property crimes committed by meth users? Your statistic about property crimes is less than useful--it links Oregon beer with crime. If you're going to make that connection, seems like it's incumbent on you to find the data that show it.
You linking of social harm to Oregon's breweries makes me more than uncomfortable. I mean, you even link them to child abuse. (As a researcher in the field, I know there are no data to support this connection.) Finally, the $6 billion figure is also misleading because the vast bulk of it is missed work days--not something that comes out of state coffers.
I don't know anything about your discussions with the Brewers Guild or what their position is, but based on these overheated charges, I can understand why they might not be in a mood to cooperate.
And before everyone comes down on me--yes, Ben rocks. I'm high on Ben, and love that we have a young, thoughtful, progressive like him in the legislature. But sometimes friends disagree. It's not the end of the world.
Posted by: Garrett | Feb 16, 2009 2:29:38 PM
One of my good friends is the proprietor of the Side Street. It's a nice little bar off of Belmont. I've talked to him about this and I can assure you that if this passes Kurt Widmer's prediction is going to be a lot closer than Ben Cannon's prediction. 15 cents a beer is a joke. The price always raises by at least $.25. Prices raised around town when the price of hops went up and increased the price of a keg by $5 or so. Imagine the price raises when it goes up by $46 a keg.
Look, it's businesses all around that will be hurt by this. From the brewers to the places that sell the final product...they're all going to feel this and this is definitely not the time to put a debilitating sin tax on one of Oregon's best industries.
Posted by: Eric Parker | Feb 16, 2009 2:37:56 PM
"85% of all property crimes are committed by a drug addicted person"
...and that addiction is started by being bored to the point of doing anything to keep busy. That includes the beer...any beer. They drink beer because they are bored, then repeat until they become addicted. they then go and do the crimes because they need something to do. It's not really an addiction, just a response to someone who need to do something constructive (or unconstructive) with thier spare time.
Its not as disingenuous as Jeff mistakenly believes.
Posted by: DanOregon | Feb 16, 2009 3:03:11 PM
And its not like barley prices have come down much either. I get some people want to fund projects by making people who partake in specific activity to pay for it. But why not also tax coffee or tea, caffeine is addictive as well.
Clearly the state's resistance to a sales tax has tied the legislatures hand. I just hope the Brewer's Guild hosts a "drink in" at the Capitol. Should be fun.
Posted by: Kurt Chapman | Feb 16, 2009 3:06:55 PM
Christy - tell your legislator that as soon as 100% of the existing tax on beer, wine and liquor goes towards substance abuse treatment; the rest of us beer drinkers will engage in a discussion about what is a reasonable amount to raise the beer tax. Until then the answer is a sold no.
Posted by: Vincent | Feb 16, 2009 3:23:14 PM
If the morally rigid want to attack beer that contributes to drunkenness and alcoholism, they should go after bland and cheap stuff such as PBR.
Wow, talk about rank classist snobbery.
Posted by: torridjoe | Feb 16, 2009 3:23:20 PM
I'd have to agree that lumping drug abuse in with the social costs of alcohol needlessly inflates those costs. But still..
"let's recognize that even now they pay well more than their fair share."
I don't think can really be accurate, given the difference between sales and social costs as studied in places like California.
Posted by: David McDonald | Feb 16, 2009 3:32:02 PM
I suspected that a post about beer would bring out all the brave lefties with their anger and stress. Just don't talk about the impovershed or homeless in our state. You'll be called a "bitchy snark" on Blue Oregon.
Posted by: Huck | Feb 16, 2009 4:41:20 PM
Wow, these comments are rich. Eric Parker, what are you, six? Did you just watch a scary after school special? And how bored must you be to be cooped up posting such drivel? Have you ever had a beer in your life? Teetotalers have no credibility in this discussion, or much else, so please.
Not one comment about Jeff's point that the tax isn't a bad idea, per se, just badly conceived and less efficient than it could be! If Ben wanted a 15 cent increase, why not tax the pint, rather than the brewer? By taxing the brewer, the cost goes up to the distributor, who then raises the price to the retailer - that's how the 15 cents turns into $1 - because the distributor and retailer have to make a profit percentage.
Second, (and I can't believe this isn't mentioned) - why would we want to make Oregon products less competitive outside Oregon? Think about all the sales of Rogue to all 50 states? How's that going to look on a New York shelf when only the Oregon beers go up in price? Why would we want to hurt our export market? If the tax were at the retail level, then exports wouldn't be hurt. Why don't we tax grass seed farmers, wineries, timber owners, manufacturers of circuit boards, and fishermen while we're at it?
Geez people, think about this one - it isn't about 1) the costs of alcohol on society, or 2) about the budget deficit? You deal with 1 by taxing all alcohol at the retail level. You deal with 2 by raising generally imposed taxes, not picking on specific areas. It's about good policy.
I wrote my legislators about this, and copied it to the sponsors. Cannon's office did not send anything out as they say here. His arguments are valid, but like most of the posts here, just totally miss the POINT! A democracy gets the leaders it deserves. Even a sharp guy like Cannon misfired on this one.
Posted by: Carl Almond | Feb 16, 2009 4:44:00 PM
I'm now convinced that Eric Parker is a gifted satirist working against HB 2461--the alternative is simply too frightening.
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Posted by: Tom Vail | Feb 16, 2009 9:09:19 AM
This is the best considered and written post I have ever read on BlueOregon. I wish more people looked at all taxes and proposed taxes in a similar way.
Well done, Jeff. And this from a non-drinker!