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Tuesday, December 19, 2006

Taxing Your Beer

For the past week or ten days, a fascinating discussion about beer taxes has lit up the Oregon Brew Crew's email listserv. The issue at hand is the new Democratic Oregon legislature, their desire to up taxes in general and on beer and wine specifically, the waning power of the central beer lobbyist following the great Maui legislative scandal, and how all of this may affect local breweries and the price of beer.

Gary Corbin has done a bang-up job summarizing the issues:
The proposals, it seems, have a few things in common. One, it would raise the beer excise tax from $2.60/BBL to around $34/BBL, a 13-fold increase. Two, it would exempt smaller brewers; specifics vary, but the number 200,000 BBL/year is being bandied about. Three, the proposals target only beer – not wine or spirits. The money, it is claimed, would be used to pay for drug rehabilitation and treatment programs....

Compare beer to the other alcohols and the change is even more amazing. Borrowing calculations posted by Mark Wilson on the Oregon Brew Crew listserve, on a per-glass basis, wine is taxed at 3 times the rate of beer (2.6 cents vs. 0.8). Under the new rate, beer would be taxed 10.4 cents per glass, over four times the rate of wine. Spirits, at 8.75 cents per glass, would ironically become a relatively “cheap” drink, tax-wise.
Despite my commie politics, I have always been against this tax. In a three-tiered system, producers, distributors, and retailers all make a dime off brewers back, but this tax would only target brewers--ironically the least able to absorb costs. If the legislature is serious about raising taxes on beer, they need to offer local breweries something in return. The real power brokers in the beer biz are distributors, who control which beer gets sold and where.

Many restrictions have limited the power of breweries (this goes back to the old country, when English breweries dominated local markets and forced taverns to sell their beer in the "tied-house" system), but breweries now have the least control over their market. Since protecting local breweries ought to be paramount, give them more control over distribution. For breweries below a certain size, allow them to self-distribute to taverns and grocers. And put the bar a little higher--say 400,000 barrels--so none of our local breweries get hit by this tax anytime soon.

Anyway, go read Gary's whole post. Good stuff.

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