BILL OF THE WEEK: Senate Bill 1565

Sen. Lee Beyer (D-Springfield), Sen. James Manning Jr. (D-Eugene), Rep. Rob Nosse (D-Portland), Rep. David Gomberg (D-Central Coast)

Small distilleries say they should get the same kind of tax break that breweries and vineyards enjoy. The Oregon Liquor Control Commission collects all money from sales in a distillery's tasting rooms. It would give back 45 cents on the dollar for the first $250,000 of sales in those tasting rooms (plus costs). (The OLCC currently returns 17 cents.) It would cost cities, counties and the state $4 million by the 2023 biennium.

Craft distilleries love the bill, for obvious reasons. Plenty of lawmakers do, too: 21 senators and 14 representatives have already signed on as sponsors, showing their affection for homegrown businesses.

"In 2010, Oregon was leading the nation in the number of distillers," says Brad Irwin, president of the Oregon Distillers Guild, who says the system of taxation has held the state back. "We are not asking for a handout. We are asking to be taxed at a reasonable rate."

The League of Oregon Cities, which notes that liquor taxes, which generate $80 million annually, are the second-largest revenue source shared by state and city governments, behind the highway fund. The League argues that if the Legislature wants to support economic development, it should find a way that doesn't cost cities, which have to pay for the impacts of alcohol abuse.

It's also not clear that small distillers need a tax break. The industry has grown from three distilleries in 2000 to 70 this year.

Tax Fairness Oregon, the state's leading watchdog of tax policy, suggests the Legislature should reconsider which industries actually need a subsidy.

"More bookstores might have succeeded if the Legislature had made their businesses economically viable by returning to them $112,500 on their first $250,000 in sales each year and $42,500 on every $250,000 in sales thereafter," Jody Wiser of Tax Fairness Oregon testified at a Feb. 6 hearing on the bill.