Taxing Beer

The House Revenue Committee taxes up the issue of raising the beer tax tomorrow. There are currently five different versions of legislation in the offing; they fund different things and tax beer at a different rate. I've got a few thoughts about this, but let's get some facts out on the table first:
  • The legislature is considering various versions of excise taxes--fees that are charged to the brewer, rather than the distributor or retailer.
  • One version of the legislation (which has been to the legislature before) would raise the tax to $34.60, a $32-per-barrel hike over the current rate of $2.60. A barrel is 31 gallons, so the per-gallon increase would go from eight cents to $1.12.
  • The national mean (average) for the beer tax is $7.75 per barrel, and the median (half pay more, half pay less) is $5.25.
  • Some of the legislation is tied to the Consumer Price Index, which increased 31.8% between 1994 - 2005. However, over the same period, beer prices only increased 23%. Therefore, the tax grows in proportion to the cost of production over time.
  • Some of the legislation would exempt all breweries who sell less than 125,000 barrels in Oregon. Currently, no brewery sells that much, but in less than a decade Deschutes, Widmer, and Full Sail could. 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.
Democrats want to find a way to raise taxes on beer, which isn't exactly unreasonable. The state hasn't raised taxes since 1976. In today's dollars, that same tax would be $9.41. But there's a lack of cohesiveness in both the function of the tax (in one version it is a set-aside for state troopers, and in another for mental health and drug addiction services) and its design.

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 who take a cut, and the distributors turn around and sell it to retailers, who sell it for four bucks a "pint" (more lucrative than it looks), getting their cut. Yet the tax being considered tomorrow will only affect the brewer. Legislators are doing their best to make sure it mainly affects out-of-state brewers like Bud. But it is worth asking the question: why do you need this tax, and why are you targeting breweries?