A Plea for Common “Cents” …..$

A  number of recent Beerchaser posts have chronicled the challenges faced by Oregon bars and breweries over the last year because of the pandemic.  Demonstrations/riots in the City of Portland, which have made national news and wildfires which ravaged the State, exacerbated the virus-caused lockdowns – all economically adverse.

Another unfortunate victim – closed indefinitely

Then most recently, a once-in-a-lifetime ice storm caused widespread power outages and again shut down business just as many had gotten the green-light to reopen.

For example, the innovative Oregon Public House closed its doors in November and the excerpt from its website is typical:

“This choice, made by our Board of Directors, reflects the reality of where we are after many months of reduced sales and related challenges….In this moment of ‘freezing’ restaurants and other businesses, we hope that you choose to support small and local businesses in whatever way that you can, because many of them have been struggling in the same way that the pub has.”

Well, I’m amazed and appalled to report that a new – avoidable specter – now rears its ugly head.  It’s one that could throw another wrench into the efforts of the beverage and hospitality industry to survive.  This one was originated by some sorely misguided, myopic and, quite frankly, apparently mindless individuals – mindless at least given the economic context.

Just as the virus has invaded our daily existence, it seems like common sense has often concurrently evaporated.  A number of times during the pandemic, I have uttered the phrase, “What were they thinking?” – the most recent involving a Cancun getaway, but there have been many others and not just those which make us laugh when we read the annual Darwin Awards.

Even those with a net worth of $87 billion sometimes make crazy financial decisions….

Like Philadelphia Eagles Coach Doug Pederson’s decision to give a third-string quarterback playing time in a game with playoff implications for other teams.  Then there was Vice President, Mike Pence visiting the Mayo Clinic without a mask in May 2020 and Mayo Clinic officials not challenging this action.

A leading stock market newsletter even questioned the legendary investment guru recently with an article entitled, “Berkshire Hathaway: Respectfully, Mr. Warren Buffett, What Were You Thinking? “(BRK.A) | Seeking Alpha

This time – and in one of the most egregious – it’s several Oregon Legislators (Rep. Tawna Sanchez (D-Portland) and Rep. Rachel Prusak ( D-West Linn) and an Oregon non-profit – Oregon Recovers – led by its Executive Director, Mike Marshall – who are proposing an extreme increase in alcohol taxes.

“Marshall said businesses could pass the increase in cost to consumers, arguing that the tax hike is the only way to curb harmful consumption and binge drinking.”  (emphasis added)  (KOIN.com 3/2/21)

As reported in this Fortune.com article article excerpt, they are proposing to raise $293 million over the next two years by this tax increase.

“Oregon brewers and vintners could see a dramatic rise in the cost of doing business if a new bill making its way through the state legislature passes. Oregon House Bill 3296 seeks to increase the state’s beer tax by 2,800% and wine tax by 1,700%.

Officials in Oregon’s wine industry say the bill would result in a $2 or more price increase on every bottle of wine sold in the state. Beer and cider could see even bigger jumps.”

Beer tax – from $2.60 per barrel to $72.60 in one fell swoop

Currently the Oregon tax on each barrel of beer is $2.60.  House Bill 3296 would increase that tax by $70 to an astounding $72.60 a barrel.  For beer, this would amount to about thirty-one cents per pint.

Michaeal LaLonde, the President and CEO of Bend’s Deschutes Brewery, stated;

“Unfortunately, a recent economic report from the Beer Institute and Brewers Association estimates 25% of those Oregon beer jobs will be lost by the end of 2020 because of the COVID-19 recession.” 

His 10/12/20 guest editorial in the Bend Bulletin responding to the proposal also asserted:

“Oregon is proposing to kick you when you’re down. COVID-19 has hit the restaurant, food, and beverage industry hard. In order to shore up state coffers, the Oregon Health Authority has released a proposal to raise $293 million by increasing the tax on beer, wine, and cider by 800%.  Not staggered, not stepped, but an instant 800% increase. The consequences would be simply devastating.” *

* Evidently the original Oregon Health Authority proposal in Gov. Kate Brown’s budget last October was for the 800% proposal and the more draconian increase followed in February by the Legislators in HB 3296.

Portland’s renowned Oregon Brewers’ Festival

As an example of the hardships, it was announced just this week that for the second year in a row, the Oregon Brewers’ Festival – Oregon’s largest and one of the longest-running in the nation – according to Willamette Week  is canceled this summer – again!

“Recovers” is a relative term…..

It is ironic when small business owners are wondering if they will survive and how they are going to recover after what they’ve faced in last year, that the Co-chair of Oregon Recovers stated:

“As we recover from the pandemic, it’s critical that we adopt strategies to protect our families and increase prosperity.” (emphasis added)

To ensure that those promoting the idea get the point, one more recent statistic – this one from Guy Tauer, an economist in the Oregon State Employment Division:

“Leisure and hospitality had 211,000 jobs in December of 2019 and by December 2020 employment fell to 129,400, essentially erasing the industry’s previous 25 years of job gains,” Tauer writes. “Of the 178,200 payroll jobs Oregon lost during that time, 81,600 of those, or 46.9%, were in the leisure and hospitality sector.”

There have been debates over the years about sin taxes – on alcohol, tobacco, gambling and more recently, sugary drinks, and there are pros and cons. There’s essentially a consensus, however, that sin taxes are regressive and the heaviest burden is on lower income individuals.

Will it accomplish its purpose in reducing addiction and underage drinking or just reduce consumption generally and hurt small businesses?  And how effective have Oregon’s addiction and recovery programs been to this point without adding substantial millions – especially since there is no infrastructure to handle the increased funding.

From the Oregon Recovers web page:

“Build A New System of Intervention:  ACRA will shift the burden of engagement and/or intervention in an individual’s substance use from the criminal justice system to the healthcare system by providing healthcare, social service, education and criminal justice professionals with the education and tools needed to engage patients earlier in their addiction.” (emphasis added)

It’s true that Oregon businesses have a stake in reducing alcohol addiction which is a drain on productivity and increases the cost of operations. I notice, however, that with one exception (Andrew Rowe) no one on the Oregon Recovers Steering Committee (Board) indicates having worked in the private sector or having a business background – nor does its Executive Director.

And the people of Oregon have been very generous in approving taxes for social causes – most notably in Portland where in May – during the height of the pandemic – a nationally innovative homeless service tax measure was approved.

It will raise $250 million annually for ten years towards funding behavioral health services, job training and other services for homeless people.

While it is true that the current tax on beer in Oregon is one of the lowest in the country and has not been raised since 1977, the approach in this legislation (HB 3296) is clearly not the way to accomplish it.  Oregonians are empathetic and will endorse reasonable ideas to address alcohol addiction and underage drinking.

The Oregon Beverage Alliance has started a petition drive entitled “Don’t Tax My Drink” to ask local Oregon lawmakers to oppose tax increases on Oregon breweries, wineries, cideries, distilleries, restaurants, bars and their customers.

To this observer, the tax proposal is brazen and arrogant.  Remember the pandemic slogan, “We’re all in this together?”  So I hope people will write to Mike Marshall and Reps Sanchez and Prusak.   You might start your communication by asking, “What were you thinking?”  And let’s hope that at least a modicum of common “cents” will prevail.

And Cheers to the Oregon Brewers’ Guild!