More on the Beer Tax

[I posted at BlueOregon about this, perhaps more coherently. I'm crossposting it here.]

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. Lucky_lab 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.

  1. 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.
  2. 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.
  3. 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.