In last week's edition of WW, we made Oregon brewers our Rogue of the Week.
The reason? Brewers were fighting a a bill from state Rep. Ben Cannon (D-Portland) that would raise Oregon's beer tax for the first time in 32 years. At $2.60 a barrel, the current tax is one of the lowest in the nation. Cannon would raise that per-barrel tax to $49.61—making it the highest in the country.
After our piece was published, we were contacted by Kurt Widmer, president of Portland's Widmer Brothers, and Irene Firmat, founder and CEO of Hood River's Full Sail. They wanted to explain more fully the stakes for the industry. Much has been written about their claim that a 20-cent tax hike on a 16-ounce glass of beer is multiplied many times by the distributor and wholesaler and grocery store before it gets to the consumer. We decided to ask them about their more philosophical problems with a tax increase. Here are edited excerpts of that interview. (Firmat's husband, James Emerson, also sat in during the meeting.)
Irene Firmat: You know, I got to tell you—I get to the point that I absolutely dread when there's a legislative session because we seem to go through the same process every time, and I take a lot of pride in what we've done as a business. People thought we were crazy 15 years ago to build a brewery. Plus, we're employee-owned. I don't like to blow our own horn very much, but I think I can speak for all of us when I say we went into this trying to be a really good corporate citizen. So our frustration really is that this conversation stays on this same dialogue session after session. And one of our first issues really is if you're gonna have a conversation about a production beer excise tax, let's have an honest conversation about what that is and how much [it ends up costing by the time it gets to the consumer].
WW: Excise taxes have not been raised on wine in some time. But wine is now not part of the conversation, is it?
Firmat: No, wine is not.
Don't you have the same lobbyists as the wine industry?
Firmat: We don't have lobbyists.
But there have been efforts in years past to talk about increasing the excise tax on wine, and it's not in the discussion this year.
Kurt Widmer: It wasn't in discussion last session, either.
How do you respond to the need to fund alcohol programs?
Widmer: The money's already being collected from alcohol. $170 million is now raised in the state of Oregon between wineries, the Oregon Liquor Control Commission [which sells hard alcohol at a profit, which goes to the state] and breweries. It's just they only put 8 percent of it into treatment: The rest goes to the general fund.
Has the Oregon Restaurant Association weighed in on this bill?
Widmer: Oh yeah.
They're on your side on this?
Widmer: Absolutely. They don't need something like this coming down the pipe for their customers.
Do you have any sense of how much beer sales will decline if you raise the price because of a tax hike?
Firmat: I would say that in this economy, who knows? We had someone who testified against us, and he said it's a luxury. And you're right, we are. We've made our living being an affordable luxury. That is who we are. I don't have any illusions that we would be something cut if the economy gets worse, especially a combination of the economy and putting our price higher and higher. We're in a vulnerable spot.
Widmer: Alaska raised their tax in 1996, dramatically. To the highest in the country [$33.17/barrel] It took five years, I think, before the sales came back to that level. You're already looking at a situation where hard liquor has grown over the last five or 10 years, and wine has grown, but beer [sales] has been relatively flat.
Firmat: Don't you think Pittsburgh protects steel- and oil-producing states to try to protect those industries? There's nothing fundamentally wrong with an economic policy that says we nurture the businesses that are generating jobs and property taxes and all of that.
Widmer: The three states that have lower excise taxes than we do are Missouri, Colorado and Wisconsin. [Editor's note: Actually, Kentucky, Pennsylvania, North Dakota and Wyoming also have lower beer taxes than Oregon.] Each one of those is the headquarters for a major brewery and a brewing business where there are a lot of brewery-related jobs. Oregon has highest level of the craft segment in the U.S. [12 percent of the beer sold in Oregon is craft beer, a far higher percentage than anywhere else.] You know, the state did a great job. They looked at the wineries in the '80s as an early model and said, "Look, we created this wine industry and it's created a lot of jobs and brought a lot of tourism, and maybe we can do the same thing with breweries." And it worked. And we've created over 5,000 direct jobs and over 10,000 indirect jobs. That's a success story by any measure that I can think of, and why would you want to jeopardize that?
So, let me ask you to put yourselves in the position of the Oregon Legislature. You're facing this huge pit of a deficit. I'm sure they could cut costs and be more efficient, but probably not enough to fill the hole. They look around, and they see that your industry—compared with how your industry operates in other states—is taxed less. You're saying, "Don't go here." Where would you have them go?
Firmat: Raise the corporate tax rate.
You're a corporation. You're saying you'd accept a hike in your corporate income taxes?
Firmat: I'm cool with that. I pay $10 [currently] for the pleasure of being in business. That's a ridiculous rate.
Widmer: Raise the gasoline tax. Ask state employees to pay some of their health insurance. All of my people do. Me too.
You're saying that the proposed $50-a-barrel tax hike would be a huge impact on your industry. Let's say it was a 100-percent increase. (Which would be a $2.60-a-barrel increase and put Oregon at about the national average.) What would that mean to you realistically? Lost jobs? Closed breweries.?
Firmat: We just are really going through a brutal year with all the material costs. Could we absorb another $2.60 a barrel on our costs? Maybe. But then we'd have to cut back on health care for our employees, and cost-of-living increases or not investing in many projects.
Widmer: For us, it's hard to quantify. We've already told our employees there'd be no wage increase; there'd be no bonuses, no cost-of-living increases. We've already laid off a bunch of people in November. Look, a lot of this is going to appear as self-serving. But we are also advocating on behalf of beer-drinkers. Sure, I'd like to save my company. But I also like that people get to drink my beer in Oregon. Also, [the fact this tax hike has been defeated before] isn't about a powerful beer lobby. I think, to their everlasting credit, it's about Oregon legislators looking at what's reasonable [and asking]: "Where can I create jobs? What can I do to help a fledgling industry?" And they look at them and say, "Hey, there's a craft beer industry in Oregon. We've supported it and we should be proud of it. We've nurtured it for 25 years and maybe we should continue to do that."