The head of Deschutes Brewery says the proposed alcohol tax introduced in the past week to the Oregon Legislature is akin to kicking the homegrown industry while it’s down. After a year of partial openings and closings and reduced revenues from the lack of keg sales, beer brewers need every advantage to keep the doors open, said Michael LaLonde, Deschutes Brewery CEO. They don’t need a proposal to raise taxes by as much as 2,800%, as House Bill 3296 would do to tax beer, wine, cider and distilled spirits.
The measure could add up to $2.31 to the cost of a six-pack, assuming the brewer doesn’t absorb the increase in taxes, said Bart Watson, Brewers Association chief economist. In Oregon, the brewer, the distributor and the retailer all tack on their own margin to the cost of beer.
“Craft beer is an essential part of Oregon’s economy, and closures due to COVID-19 are having a devastating impact on Oregon’s breweries and the hospitality sector,” said LaLonde, whose brewery is ranked 11th in terms of production in the U.S. craft beer arena, according to the Brewers Association, which ranks craft brewers each year.
The beer-brewing industry generates $12.5 billion in revenue to Oregon, said LaLonde. The 400 breweries statewide employ 43,000 people, he said.
The measure increases taxes on beer, wine, cider and distilled products to fund behavioral health and substance use programs and create the Addiction Crisis Recovery Fund.
The fund is necessary because Oregon has the third-highest untreated addiction rate in the nation, it is ranked 47th in the nation in access to addiction treatment and alcohol kills five times as many people as all drug overdoses combined, according to the measure.
“Oregon has an unprecedented addiction crisis largely driven by alcohol and made worse by COVID-19,” said Mike Marshall, executive director of Oregon Recovers, a support network for Oregonians experiencing addiction to drugs and alcohol. “With this, we have the opportunity to dramatically reduce excessive drinking, reduce alcohol-related fatalities and build the system needed to help the 9% of Oregonians who suffer from untreated addiction.”
Rep. Jason Kropf, D-Bend, said in an email to The Bulletin it’s important to bring the need for more services out for discussion.
“Far too many struggle without access to the support and services they desperately need,” Kropf said. “At the same time, our beer and wine industry has been hit hard by the pandemic, and I am hearing from many in our community who are concerned about the timing of the proposal. I share that concern.”
The measure raises the tax for brewers and hard cider makers from $2.60 a barrel to $72.60 per barrel. Wine is taxed at 65 cents per gallon of wine, and under the proposed legislation it would go to $10 per gallon.
“This is something that is definitely going to affect our business,” said Ty Burnett, GoodLife Brewing co-founder.
“We’re tied to a three-tier system. We sell to the distributor, who sells to the store and then it is sold to the consumer. At each turn, every one adds up to 30% to the price.
“This would put our product far beyond the most expensive.”
The median tax per barrel of beer is $6.20 in the United States, Watson said. A barrel of beer is 31 gallons.
Brewers fear that consumers will trade down to cheaper products rather than pay these higher prices, Watson said.
Doug Maragas, owner of Maragas Winery in Culver, said he hoped lawmakers opt to not give the measure a hearing, which essentially will mean that the taxes would not be raised.
“I hope the Legislature won’t consider it,” Maragas said. “I don’t understand the reasoning of increasing taxes on an industry that has fallen, especially for the small and medium-sized. I’m really hoping that logic prevails here.”
In Oregon, the producer in the state pays the tax on the product, said Christina LaRue, Oregon Brewers Guild co-executive director.
“It’s a bill meant to kill the alcohol industry,” LaRue said. “We’re a destination state for people looking for craft beer and great wine. It’s a lot of money to be eliminated especially during a pandemic.”
If the measure passes, brewers will have to make up the loss in revenue some where. The proposed measure is not a sales tax, which the consumer pays, but instead an excise tax paid by the producers, distributors and retailers.
Proponents of the measure say the tax will only add 21 cents to every can of beer, LaRue said.
But actually, at every touchpoint, the price will be raised. The association has launched a petition drive donttaxmydrink.org.
“There’s only so much shelf space and tap handles in bars, so brewers are already vying for the real estate,” she said. “You’re putting brewers backs up against the wall at $72 a barrel tax. “
