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Raising Revenue: Corps and Brews
It's no secret. Oregon is desperate for money. The state economist is predicting a three billion dollar shortfall in the budget for the next two years. Before they'd finished re-balancing the budget for the rest of this fiscal year, lawmakers were already looking at a whole raft of potential ways to raise money. Cigarettes, beer, the corporate minimum tax, personal income taxes, bicycles, hospitals — anything seen as potentially bringing in revenue is on the legislative table
In the first installment of our look at taxes, we'll focus on proposals to increase the beer tax and end the $10 corporate minimum tax.
A proposed hike in the beer tax is sudsing up a brawl and tea party satire. The bill directs the estimated $300 million it would raise to prevention and treatment of substance abuse. Brewers say a homegrown Oregon industry would be hurt more than the revenues raised are worth. They also say that, because of the distribution system, the almost $50-a-barrel tax hike will really mean $1.50 more for a pint. Bill supporters dispute that, and say low funding for abuse programs already hurts real people with real addictions.
It's harder to find the real people in the debate over Oregon's corporate minimum tax, but raising it has long been on the Democratic agenda. Here's the history: back in 1929, the state first imposed a minimum of $25 on corporations doing business in Oregon. That was dropped to $10 in 1931, and there it has stayed.
Advocates for an increase say it's unfair that about two thirds of the C corporations in Oregon pay only the $10 minimum. (This only applies to the state's thirty-some thousand C corporations, which are generally larger than S Corporations or LLCs.) The business community is tired of the fight and is now generally on board for some kind of modernization. The question is what. Business groups want just a higher flat fee. But one bill proposes a tax based roughly on "value added." Another would base a stair step of tax increases on companies' gross sales receipts.
In the coming weeks we'll look at more of the legislature's efforts to raise revenue, including kicker reform and a wholesale revision of Oregon's tax system. You can leave your suggestions on our blog. For today — do you drink beer? Do you make it? How will an increase in the price affect you? Have you ever participated in state-funded addiction treatments? How did that affect you?
Or do you run a business? How much income tax do you pay? How would the different proposed hikes affect you?
GUESTS:
- Stephanie Soares Pump: Chair, Governor's Council on Alcohol and Drug Abuse Programs
- Irene Firmat: Founder and CEO, Full Sail Brewing Company
- Ben Cannon: State Representative for Oregon's 46th District; main sponsor of the bill to raise beer taxes.
- Chuck Sheketoff: Executive Director, Oregon Center for Public Policy
- John Marshall: Tax and fiscal policy consultant for Associated Oregon Industries
Tagged as: beer · business · corporate minimum · legislature · tax
Photo credit: Photo credit: Mfajardo / Flickr / Creative Commons
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Just when I was about to send my own comment, I read this one and I couldn't have said it better. Every point is exactly correct. The authors of the bill are delusional if they think the tax will be passed along in any other manner.
Have they looked at a 3 to 5% sales tax, lowering income and property tax to reasonable levels to maintain a more consistent stream of revenue? Every recession we go through this - too much reliability on income taxes and when unemployment goes through the roof the tax dollars dry up, but spending at the state level remains the same. When will they (legislators) get enough backbone to deal with budget shortfalls in a responsible manner rather than attacking single industries that may gain political favor of the minority - or is it that minority that funds their elections?
Legislators should be required to take business classes after elections so they can at least understand a p & l worksheet. We have too many in office that couldn't make it as sportscasters or what have you, making important decisions out of pure ignorance and political gain, yet negatively affecting the lives and careers of the people that put them in office. Pretty shameful.
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Tax Junk Food!!
Why put another tax on wine or beer? Both have proven health benefits. It's time to tax the real sin; the junk foods, the carbonated beverages and the bottled water. Put a tax on potato chips, corn chips, everything made with high-fructose corn syrup, all carbonated beverages and all those useless bottled waters. Just five cents per item will help defray the cost of all the illnesses caused by obesity and poor health.
And while we are at it, let's tax all those sugary breakfast cereals that are targeted at children that contribute to early onset diabetes.
Put the money directly into the Oregon Health Plan.
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When the cigarett taxes were proposed last time around, I said the same thing. Implement a "cookie" tax!
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The above comments are so perfectly stated that I would only ad that sin tax's are always regressive and since the state wants to further stress a homegrown Oregon business why not tax each microchip that Intel produces and see what a stink that raise's. Once and for all stop with the sin tax's and if you must raise tax dollars then at least do it in a way that tax's everyone equally,as has been suggested many times,a penny a roll on toilet tissue,no one would even notice or be overtaxed,and of course its totally non regressive and fair to all. Yes alcoholism is a problem and always has been,the recession or depression or whatever they're calling it this week will only further deepen problems with alcohol,but personal responsibility is always called for, gamblling which used to be illegal,also requires personal responsibility is the answer,why should those of use who behave have to pay higher tax's to treat and council those undisciplined individuals ?
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Although your overview of the topic mentions C-Corp, many people lump all corporation types together. I work for an S-Corp and although the company pays the silly $10 tax, all profits from the company are passed out to the owners and taxed at our normal tax rate. So the S-Corp pays BOTH the $10 tax and also taxes on all profits.
So, unless the owners of an S-Corp are playing games by having the company pay personal expenses, the S-Corp does pay a fair tax on its profits.
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There was, and might still be, a tax abatement on historical buildings. This tax abatement has not been adjusted since it was first implemented in the early 70's. $2 million house can generate some nice revenue.
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I don't want this conversation to get too far without including the topic of people who use Oregon's infrastructure without paying taxes to this state. Whenever I see a WA license plate I think about the members of bedroom communities in Vancouver who come across the bridge to work, shop, be entertained, drink and then go back to WA at tax time. I for one support any tax that reaches this untapped resource. If an Oregon tax (like the proposed beer tax) encourages these 'fair-weather-citizens' to make better use of their own infrastructure and bars, I look forward to having it in place. That being said, any tax on an industry should be more moderate than the proposed increase in the beer tax.
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The tax proponent claims underage drinking is one of the big motivators. If this is truly the nexus for the tax increase, then wouldn't you make a bigger dent by shutting down the alco-pops industry? Those drinks are tailored for and marketed to underage drinkers, yet the segment seems to be operating with impunity.
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Amen.
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I am ok with the tax on beer going up and I reject that this growing industry will be adversely impacted by the tax increase. When the brewers and distributors decide to raise their prices they don't worry about it causing the industry to collapse. They just cover their new costs by raising their prices. It's happened a few times since I started drinking micro-brews and the industry still seems to be doing ok.
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It all comes down to the price elasticity for beer. Alcohol, cigarettes and gasonline are all examples of products with pretty inelastic demand. This means that a price increase usually has minimal impact on demand. That said, a big increase in taxes will cause consumers to keep their alcohol unit consumption about the same, but they'll shift to cheaper brews --- slamming the craft brewing industry.
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I have single comment, it relates to what is going on in Oregon we are, almost at 10% unemployment.
Given the current state of the Oregon economy there is not lagitimate reason to increase any taxes of any kind beer or highway or any others until our economy recovers.
In fact I think during these kind of times the only thing that should be allowed should be cutting taxes.
Thanks
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Today the Senate Finance and Revenue Committe is deliberating SB 609. The Association of Oregon Industries has requested this committee to consider this bill. While I understand that the AOI would protect "trade secrets," I don't know why they need a law to create "rebuttable presumption" regarding tax returns so that these returns remain confidential. I have to assume that this is to protect the corporate behemoths who don't want to be embarrassed if it is found that they only pay a corporate minimum of just $10. Why don't we have corporate transparency?
http://tinyurl.com/csy7zg
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If you raise taxes so sharply your consumer base will drop. Not to mention driving businesses into other states. This will leads to a loss in taxable revenue and a decrease in funding for drug abuse programs. Am I the only one who sees this?
You can't squeeze blood out of a turnip!
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Why not raise the 8% that is earmarked from businesses to pay for addiction/prevention services?? Raise it to 12 or 15%. Where does the rest of that money go? How about a cigarette tax to pay for addiction/prevention services??
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I am sooooo glad that you are talking about this on OPB!! The problem with this bill is that it is attacking one of the only growing and thriving industries in Oregon. I live in Bend, and our umemployment rate is currently at 12% and rising fast. This tax will only put small breweries out of business and hard working people out of jobs. I have to say that the sponsor of the bill hit my point on the head, if imported beer is what will be affected the most, why don;t we tax imported beer only?
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I believe that Oregon has a world class craft beer industry. It is small & fragile & according to your commentors represents only 12% of the sales in Oregon.
Nothing should be done to impair this craft beer industry. Not even 15 cents per pint. It is pure speculation re what would really happen re the mark up & no chances should be taken that would impair the craft beer industry.
If more money is needed to treat drug addition it should either come out of the existing alchol tax or the general fund.
I totally wagree with the guy who is speaking now.
Also I agree with the guy who says we ought to tax junk foods. They cause weight problems which lead to diabetes, strokes & heart disease.
cheers-chuck mcginnis
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This is a classic case where the State needs to look at the organization regulating and operating the liquor retail sales industry in Oregon, OLCC. The agency is not neccesary and should be shut down with the savings going to support the rehab programs that the beer tax increase will be paying for. Oregon needs to get out of the distribution and liquor store business and move into a privately held marketplace with a direct tax on all wholesale liquor distributors that is equivalent to existing tax rates. Shutting down OLCC would free up over 90% of their budget. Other non-state-store states live with this solution quite effectively.
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Why can't we tax out of state beer/alcohol, and either tax the instate stuff less or not at all? Is this such a ridiculous idea?
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Is the beer industry currently paying less than wine or liquor for treatment costs?
Also, have there been any studies with people in treatment to see what alcoholic beverage (wine, beer, or liquor) is the primary beverage of choice?
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As an alternative, why not consider taxing beer imported into Or from other states & countries at the proposed rates and raise Or beers at a more reasonable rate? That would encourage Or beer drinkers to switch to Oregon-brewed beers; the state would profit on taxes on non-Or beers and the homegrown industry would be strengthened.
A point regarding the "$300 million it would raise to prevention and treatment of substance abuse"; is there any data that suggests that alcoholics seeking treatment are heavy miocrobrew drinkers? Why should a small segment of the industry subsidize treatment when the big corporates that produce the cheaper beverages be left off the hook?
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I'm a drinker, and would gladly pay more to fund treatment. However, I think the idea that keeps coming up that "alcohol causes problems" is erroneous. Addiction is a disease and people with the disease will find a way to get intoxicated (I think the treatment people would agree with me on this), and the problem is so much bigger than can be tackled with this tax, even as large as it is. We are dickering around with a few million here and there (meanwhile punishing homegrown small businesess), when in fact addiction is a huge social problem that needs many more resources than brewers can provide.
Also, does anyone else see the sick irony of funding treatment from beer sales? Do you then hope people drink more so that you get more funds for treatment? While we're at it, why not fund schools through something like the lottery! Oh wait.....
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Since our small breweries are one of our finest 'exports' (items produced in Oregon that actually get sold outside of oregon) I would be against this HUGE raise in the tax. If you really think it needs to be raised, raise it, but do it in smaller increments so the breweries can absorb the costs in a sane and safe manner. Of course, if you manage to close all the little guys, you won't wind up with any tax to speak of and will only end up screwing yourselves and the beer makers both. Also loosing a small but significant number of jobs, in the process. The tax on business that hasn't been raised in so long...how does it compare to other states??? Again, may be incremental hikes would be more fair? Again we don't want to drive business away from the state or we will end up with a net loss. Besides, I guess I feel like you are talking about penalizing the folks who are respossibly using oregon products - wish three was some way to make the dealers anda busers pay for the problems....
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I own a small business which brings in a relatively small revenue and only employs one person, me. My business only owed the $10 minimum for FY2008 because it barely broke even. I could withstand a minor tax increase but a major tax hike could prevent small folks like me from opening or staying in buiness.
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The state of Oregon is ridiculous. Every time that money gets tight, the legislature wants to make new taxes. What is really needed is an overhaul of the tax structure. Begin with these two improvements:
- Add a sales tax (of course this means reducing income tax).
- Eliminate the kicker rebates and establish a real rainy day fund.
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I am the owner of a small S corporation. As just mentioned on the air, S corporations pay the corporations's tax personally. However, we still have to pay the $10 minimum tax. If that was raised, I would be taxed twice on the same income.
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As far as I understand the proposed laws, this wouldn't affect you as the owner of an S corp.
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The owners of Corporations fought very hard to get their Corporations legally defined as having "personhood", that is they are legally "people", and they ought to be fully taxed just as actual living and breathing people are taxed.
Thom Hartman wrote a book about this titled "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights".
Corporations ought to be taxed the same as other "persons" are taxed, but better yet, "personhood" ought to be taken away from them and they should be restored to limited charterhood.
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Thank you, Tom. Since the days of the first railroad corporations, they have bought their rights. It's time, long past time, corporations rights were revoked! Wouldn't it be nice for a private citizen to have their entire personal tax burden be $10! I'll take that deal.
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I like a pint of Oregon microbrew as much as the next guy. But if I ever get to the point where I'm drinking so much the extra tax becomes a financial burden, I think I'll have a bigger problem than just the cost of the beer.
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If the real point of this legislation is to provide funding for A&D treatment programs, then why not initiate a tax based on the alcohol content of the product sold.
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Great point. Even the current tax should ideally be based on net alcohol volume of the product, not the raw volume of the product. Sure, that means watery beers will enjoy lower taxes than some of the higher octane microbrews --- but it levels the playing field for all and puts for a disincentive for the makers of alco-pops and cheap malt liquor to crank up the alcohol percentages for the sole purpose of getting drunk. The big downside would be a greater price per pint/bottle for most micro-brews and Belgian ales, but at least it would be fair.
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Please clarify for your listeners: The idea that taxes are not paid on corporate profits in Oregon is simply not true, at least for the many corporations like mine that are "Subchapter S" type: Every penny of profit my corporation makes is taxed by the State of Oregon at my highest marginal personal tax rate because, even when all money is kept in the corporation, it is treated as if it is the personal income of the owners for tax purposes. So, while our company doesn't write the check for the taxes, trust me, it gets written, by me, every year. To pretend that this isn't a tax on corporate profits is as silly as suggesting that employees don't pay taxes simply because the check is written by the company as withholding and not directly by the employee. In short, employees do pay taxes and, our corporation at least, very definitely pays taxes on every penny of profit we make.
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Since their inception, corporations have lobbied the government (read "bought") into rellegating the private citizen to the level of the slave. Corporations don't pay taxes the same way private citizens do. Why is that? Because corporations lobby (read "buy") the government representatives of the private citizens to change the laws of the land to the complete advantage of the corporations. Our own representatives have betrayed us to death.
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I recently began working in the treatment field, and was shocked to learn how underfunded and undersupported the field is. Addiction is a serious public health concern, it affects generations of families. Many, many children are affected, the Department of Human Services is over run with cases of children who cannot safely live with their parents due to their addictions. The treatment center I have worked at had a spiral bound notebook full of names of women on a waiting list (it's a women and children only facility) ready for treatment, ready to work to get their kids back and out of protective services. They sometimes have to wait very long periods of time to begin treatment. I predict that as times get tougher financially, we will see addiction issues increase. This issue affects all of us in some way, whether we are aware of it or not. I'm not sure of a fair way to fund it, but it is a public health concern, that turns into a public safety concern when left untreated.
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Here's one for your series:
Republicans are complaining that the wealthy are already paying some sixty percent of federal income taxes but what they leave out is that the wealthy probably receive 98% or so of the benefits that the Government provides. And state government numbers are probably similar, including Oregon.
So. The question would be something like "Who pays taxes and who benefits from the taxes paid in?"
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Why not tax religions to pay for treatment, religions cause most of the problems that people medicate themselves for with alcohol and other drugs.
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The problem witj both the Corporate Minmum and home brew beer tax is that the legislature has allowed the issues to stagnatefor decades. Thus the fix seems overdramatic. Fairness and appropriatess are seperate concerns.
Modernization of the Oregon Tax Code is a great idea. I don't think that a legisalture caught up in the chicken little search for revenue is the best choice to accomplish that task.
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I think it is time to come up with a new idea rather than cigarette and beer/alcohol taxes. I tend to agree with finally implementing a small sales tax in Oregon. But, I did hear a great idea from a co-worker that I wanted share.
The fee for renewing an Oregon Drivers License is $40 for eight years. Couldn't we consider charging more for this service? I think most people would pay about anything for the priviledge to drive. How about $5 per month instead of $5 per year? At the same time they could increase the license plate fees. This seems far more fair than continually targeting people that enjoy a smoke and a beer.
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Comments are now closed.
Thank you for the links. I drink 5-10 pints a year. But I won't pay $4.50 for a 32oz soda at the theatre, nor will I pay $6 for a pint of lovely Oregon home brew. Too bad because I want Oregon's small breweries to thrive. Since I don't make anywhere near as much as I did a decade ago I should not afford beer. Beer tax won't affect me but it will drive small breweries out of business.
I grew up with rules and responsibilities. I probably don't drink much because I don't want to potentially face the consequences of needing rehabilitation, getting a DUII, or worse. How many of our problems would be solved if people handled their responsibilities? I'm aware not all of us are in control of our lives but most of us are. Hang up your cell phone and pay attention while you drive.
The corporate minimum tax is a joke so let's get rid of it. Let's say there are 100,000 businesses in Oregon. If each business pays $500 a year then that's only $50 million in tax revenue. Oregon's annual budget is $8 billion. Six tenths of a percent (0.625) is essentially nothing when it comes to fixing Oregon's revenue problems.