Now Playing:


Economy | local

Brewers Can't Bear Beer Tax Proposal

Another year, another beer tax bill in Salem.  Oregon has among the lowest taxes on beer in the nation, and critics have been trying to raise it for years. 

The latest proposal would turn one penny into 15 cents on the cost of a pint of beer sold in Oregon.  It has  encountered the predictable backlash from the state's craft beer industry. 

Lawmakers in Salem held two hearings last week on the proposal. Salem correspondent Chris Lehman reports.

Beer is different in Oregon.  It's almost sacred.

So even people who support a tax increase know to tread carefully.  That includes Gina Nikkel, the director of the Association of Oregon Community Mental Health Programs.

A worker inspects the vats at Hopworks Urban Brewery in Portland.

Gina Nikkel:   "I don't want it to sound like I'm against craft brewers — definitely not.  But we need to make sure that we fund the nexus of the problem."

The problem of drug and alcohol addiction.  Supporters of House Bill 2461, like Nikkel, say it would raise $165 million  a year for treatment programs.  Its chief sponsor is Portland Democratic Representative Ben Cannon.

Ben Cannon:  "Fundamentally this is a fair proposal.  It's based on a simple premise:  That adding a few cents per glass to the cost of beer is an acceptable price to pay to treat alcohol and drug addiction."

Beer-makers couldn't disagree more.  That includes Christian Ettinger, the owner of Hopworks Urban Brewery in Portland. 

The smell of beer here is pervasive.  It's a good smell — nothing like the smell of a Coors Light spilled on the sidewalk.

Ettinger knows the beer-making process inside out.  He went to the University of Oregon and got credit for interning at a brewpub.  But let's just say the end product of a brewery has a lot more appeal than what it looks like half-way through.

Christian Ettinger:  "What comes out of the grist bin is then augured into the mash tun, where we make this oatmeal like dough, although in this case it's more barley meal."

At some point during the process, all of the beer at Hopworks passes though a large vat marked "tax determination".

When the beer in the vat reaches a certain line, Hopswork pays another round of beer tax.  Right now, Ettinger says the tax equals about five percent of the cost of producing it. 

He says the new tax proposal would send that through the roof.

Beer Tax
Christian Ettinger hoists a glass of beer at Hopworks Urban Brewery in Portland.

Christian Ettinger:  "It would represent the single highest cost to us as a beer producer. Higher than labor, higher than the cost of ingredients.  It's significantly higher and would really impede our ability to grow in this state."

Ettinger says he employs 55 people with a million dollar payroll at his brewery and an adjoining brewpub.  And he's a relatively small player in a craft-brew phenomenon that's almost 30 years old.   He says the beer tax hike, as proposed, would be so damaging to Oregon brewers that there simply isnít any room for negotiation.

Christian Ettinger:  "If they want to propose something else two years from now that embraces wine and spirits together, and raises the appropriate amount of money and spreads it across those communities, it certainly warrants discussion."

Now you might wonder why beer makers are so worried about this tax.  After all, the cost would ultimately be passed on to beer drinkers.  And an extra 14 cents a pint probably wouldn't turn too many craft brew lovers into fans of Budweiser.

But brewers claim that 14 cents could turn into as much as $1.50 since distributors and retailers typically mark up the end cost.  But supporters like Representative Cannon say there's no proof that would happen.

Ben Cannon:  "To say that it will defies logic, and it defies the evidence. Which is why the real question is the extent to which beer drinkers would be willing to pay an additional 14 cents per serving.  We believe they would."

It could be awhile before anyone finds out.  The Oregon beer industry has vigorously fought tax hikes in the past, and they've won.


Oregon House Bill 2461