Wednesday, June 11, 2003
By IRENE FIRMAT
and SANDRA EVANS
Special to the News
The state of Oregon is currently considering a dramatic increase to the excise tax on beer. The tax supporters try to make it sound like a harmless tax that will only slightly inconvenience consumers and brewers. But in reality, it is a more than 1,370-percent tax increase on one single industry and will have devastating effects on the Oregon brewing industry. HB 2804 proposes an excise tax increase of $33.07 per barrel — resulting in a tax rate of $35.67 per barrel. The bill would give Oregon by far the highest excise tax rate in the country — six times the national average of about $5.60 per barrel.
This tax increase leaves us only two choices.
Our first choice is to pass it along to the consumer. Tax proponents say the increased tax burden would simply be added on to the cost of the product and consumers would end up footing the bill. But the increased tax is a production cost that is factored into the wholesaler and retailer markups before it reaches the consumer. It is not a sales tax. At each tier, the wholesalers and retailers mark up the price a certain percentage — that’s the profit margin they use to pay their bills and employees.
This “dime-a-drink” concept will add as much as $1.50 to the cost of a six-pack putting our average price around $9. This price point would put Oregon breweries at a huge competitive disadvantage because we sell a very large percentage of our beer in Oregon. We are competing in a highly competitive global market against much larger companies. It is very likely that large international breweries like Corona or Heineken, whose Oregon sales represent a tiny fraction of their total sales, would absorb the increase in order to gain market share and result in a devastating decrease in sales for Oregon breweries.
Our second choice is to absorb the additional cost. For Full Sail Brewing, that amounts to almost $650,000 per year. That is money that simply does not exist. In these economic times we are very proud of the fact we have remained a profitable company through the extraordinary efforts of our employee/owners. There is no effort we could make against this overwhelming cost.
In either case, Full Sail and other Oregon breweries would be forced to lay off employees, reduce benefits and cut community involvement — or go out of business. Breweries would literally go from profitable to broke. In the nearly 20 years that Oregon craft breweries have been in existence, they have grown to where they offer more than 2,600 family wage jobs, competitive benefits and give generously to their communities. It would be a shame to see that wiped out.
This tax is targeted solely at brewers. It is a narrow and unfair targeting of a single industry. Wine makers and spirit producers have been excluded. The OLCC has not been required to raise prices at the state stores. This draconian increase to breweries is but a band-aid to Oregon’s budget woes. HB 2804 raises less than 10 percent of the shortfall. This assumes that sales do not decline and breweries don’t go out of business — very unrealistic.
Crippling Oregon’s brewing industry would not only hurt brewers, but also Oregon’s agriculture and tourism industries. Oregon is the No. 2 hop growing state in the country and in the top 10 in barley and wheat production. Oregon’s breweries draw tens of thousands of visitors who bring millions of dollars into its local economies. This tax is counter productive to promoting economic progress in Oregon. It makes no sense to thrust this liability on vulnerable Oregon companies who compete against global companies with much greater resources. This short term solution will only weaken one of the strongest “Brand Oregon” industries we have.
As employee owners we are very proud to be members of the Hood River community. This proposed tax increase is not a “reasonable” or “modest adjustment.” It is excessive and unfair. It took us 16 years to build Full Sail to where we are today. This one tax puts the future of our company at grave risk.
Please call or write Rep. Patti Smith and Sen. Rick Metzger to stop this unfair targeting of the Oregon craft beer industry, at 1-800-332-2313 or e-mail via www.leg.state.or.us
Irene M. Firmat is CEO and founder of Full Sail Brewing Co. Sandra Evans is Marketing Coordinator and a fellow employee-owner.