Mr. Beer Goes to Salem

JUST PAST SIX in the morning outside of the Green Dragon pub
in Southeast Portland, Brian Butenschoen—president of the Oregon
Brewers Guild—stands in the light drizzle beside a rented
minivan.

Butenschoen has organized a small convoy to travel to Salem to
witness the first legislative hearing for House Bill 2461—which,
if passed, would increase excise taxes for beer producers in Oregon.
Soon, a small group of beer advocates has assembled. Butenschoen gives
the word and they point themselves toward the state capital.

People on both sides of the beer tax issue consider these hearings a
kind of tradition. For the past five legislative sessions, a beer tax
has been proposed and summarily defeated. Some blame a powerful beer
lobby; others credit a tax-shy constituency. For Butenschoen, it’s an
old game—this will be his third hearing on such a tax
proposal—but defeating a beer tax may be more difficult this
year.

Recently, the Oregon legislature learned it was staring down the
barrel of a $3 billion budget deficit for the next two years. With the
economy still in dire straits, lawmakers are looking for any source of
revenue that would keep vital services funded.

State Representative Ben Cannon adopted HB 2461 from State Senator
Jackie Dingfelder, who failed several times to pass a similar bill. In
Cannon’s hands the proposed tax has increased significantly.

Currently, Oregon brewers pay $2.60 in taxes on every barrel of beer
(31 gallons) they produce—one of the lowest beer taxes in the US.
Cannon’s bill increases that tax, which hasn’t changed since 1977, by
$49.61. The total tax burden to Oregon brewers would be $52.21 per
barrel.

Brewers say this nearly 2,000 percent increase would wreak havoc on
an industry that provides 5,200 jobs in Oregon. Bill proponents say
that the tax would immediately free up $114 million normally spent on
addiction recovery and prevention services.

Jamie Floyd of Ninkasi Brewing is riding shotgun in Butenschoen’s
minivan. He’s scheduled to testify at the hearing but he’s quite calm.
I ask how the tax would affect his brewery. He takes the chance to
rehearse a part of his speech.

“If this tax increase happens, 25 percent of the cost of every keg I
produce would go to the government,” he tells me. “We operate based on
loans. No bank is going to look at that and give us financing.”

Suddenly a car whizzes past, driven by Christian Ettinger of
Hopworks Urban Brewery. Its license plate reads HOP WRK. Butenschoen
pulls the minivan in line and waves while Ettinger and Floyd make faces
at each other through the windows.

At the capitol building, everyone makes their way to the hearing
room.

Representative Cannon and Senator Dingfelder are the first to
testify. Cannon calls the tax “fundamentally fair” and argues that the
cost to the consumer will only be around 20 cents per pint.

Dingfelder suggests that the beer tax is the most appropriate way to
handle Oregon’s underage drinking problem, which has reached “epidemic
proportions.”

Kurt Widmer, Floyd, and Ettinger testify afterward. Ettinger tells
the committee that if the tax were raised, he would move a proposed
second location for Hopworks to Washington. Floyd speeds through his
speech, obviously frustrated, asking, “Should people drive to
Washington to buy beer?”

In a brief question-and-answer period, Widmer counters the claim
that HB 2461 would only raise the price of a pint by 20 cents.
According to his calculations, the increase at the tap would be closer
to $1.25, much of which has to do with distributors and restaurants
trying to maintain profit margins. “We got [our estimate] based on what
distributors have historically done,” he tells the panel of
legislators.

Much of the hearing is occupied by testimony from advocates of
addiction recovery services. The testimony is often moving and
uncomfortable. One recovering alcoholic describes the difficulty of
raising a young boy already fascinated with booze.

Brewers discuss the finer points of the local beer market and tax
advocates talk about the ravages of meth amphetamine and drunkenness.
It doesn’t seem like they should be connected, but they’re linked by HB
2461.

The hearing has filled two large rooms and spills out into the
halls. Short on time and only halfway through the witness list, the
committee extends proceedings to Wednesday, February 25.

With such passion from both sides and a budget gap looming, it’s
difficult to guess the outcome. Back at the van, Butenschoen is
optimistic. So is Floyd, but their fate still hangs in the balance.

As the crew piles in, someone says, “After all that, I could use a
beer right now.” It’s a long ride home to get one.