Distilled Spirits Council submits comments urging commission to reject misguided proposal
Distilled Spirits Council of the United States (DISCUS) submitted written comments during the open comment period urging the Oregon Liquor and Cannabis Commission (OLCC) to reject an additional $0.50 per bottle surcharge on spirits containers which would be in addition to the current, temporary $0.50 per bottle surcharge recently extended by the OLCC.
According to a tax impact analysis by the DISCUS economics department, Oregon restaurants and package stores would see a decline in sales of more than $40 million, resulting in more than 450 lost jobs in the first few years. The analysis also refuted claims that this surcharge would generate more than $45 million for the biennium pointing out that this figure does not account for lost sales due to fee increases.
“With Oregon hospitality employment still down by 11,000 jobs compared to pre-pandemic levels, it’s baffling that commissioners would increase taxes on responsible spirits consumers and businesses while they continue to recover,” said Adam Smith, DISCUS Vice President of State Government Relations. “Increased taxes will be passed on to consumers in the form of higher prices leading to lost sales and jobs. For a typical bottle of distilled spirits purchased in Oregon, nearly 70 percent of the retail cost already goes to pay a tax or fee of some kind. An increase in that number, on top of supply chain disruptions, inflation and staffing shortages, would be too much for many hospitality businesses to bear.”
With a 113% markup on spirits products, Oregon has the highest markup among control states. The implied tax rate in Oregon is estimated to be $22.86 per gallon, significantly higher than the control state average of $13.69. On top of the 113% markup, Oregon also charges a $1.40 case fee and a $0.50 per bottle fee.
“Oregon already imposes some of the highest taxes and fees on spirits products in the nation, and distillers are struggling to keep up,” said Smith. “The distilled spirits industry is fully supportive of evidence-based solutions that help prevent alcohol abuse, but raising taxes is not one of those solutions. The price increase would harm responsible spirits consumers, businesses and Oregon’s workforce, without addressing alcohol abuse in the state.”
The DISCUS analysis points to multiple studies that show alcohol abusers are not deterred by higher prices. For example, a 2015 study published in the journal Health Economics Review concluded: “Increased alcohol taxes or prices are unlikely to be effective as a means to reduce binge drinking, regardless of gender or age group.”
The spirits industry in Oregon supports more than 19,000 jobs and $2 billion in economic impact. It also directly impacts the more than 75 Oregon distillers that support tourism, local agriculture and state revenues.
The full economic analysis can be found here.