The Oregon Legislature is set to consider a proposal to increase the state’s spirits markup by nearly 40 percent in the next six years, a move that would threaten more than 6,000 Oregonian jobs, according to a new economic analysis by the Distilled Spirits Council of the United States (DISCUS).
The bill, HB 3296, calls for increasing the markup on distilled spirits by 20 percent and then increasing the markup by a measure of inflation each year thereafter.
“It’s unfathomable that legislators would increase taxes on responsible spirits consumers and hospitality businesses in the middle of a pandemic that has devastated restaurant, bars and craft distilleries throughout the state,” said Adam Smith, Distilled Spirits Council of the United States Vice President of State Government Relations. “Increased taxes will be passed on to consumers in the form of higher prices. Higher prices lead to a loss in sales, and a loss in sales leads businesses to cut employment. This, on top of the negative financial impacts created by COVID-19 and the more than 80,000 hospitality jobs lost in Oregon alone, would be too much for many businesses to bear.”
According to a tax impact analysis by DISCUS chief economist, Oregon restaurants and package stores would see a decline in sales of more than $380 million, resulting in more than 5,300 lost jobs in the first few years. Because of the tax escalator provisions in HB 3296, within six years, the markup would grow to almost 145 percent and cost an additional 900 jobs resulting in more than 6,000 people losing their jobs.
Proponents of HB 3296 point to a Maryland tax increase and subsequent decline in binge drinking as proof of success when, in actuality, the reduction in underage drinking and adult binge drinking was part of a national trend.
“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,” Smith said. “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 numerous studies that show alcohol abusers are not deterred by higher prices. One study published in the European Journal of Health Economics showed that the heaviest 5 percent of drinkers were the least responsive to price increases.
The full economic analysis can be found here. https://www.distilledspirits.org/wp-content/uploads/2021/03/Final-Analysis-Oregon-Tax-Increase-.pdf