Brewery tax plan draws a bitter response - state excise tax would be raised by 495 percent



Olympia, WA - A proposal to pay for substance abuse programs with a large tax increase on state breweries has folks in the beer industry hopping mad.

Brewers let off steam in Olympia with a rally last week, hoping to persuade lawmakers to snuff House Bill 1255, a proposal to raise the state excise tax on beer by 495 percent.

Brewers say the bill would shut down more breweries in a state that has already lost a significant number, ranging from the Rainier and Olympia labels to smaller microbreweries.

They say the tax would be passed on to consumers, increasing the cost of a glass of beer by 50 to 75 cents, and a six-pack by $1.

"Basically, our businesses have lost a lot of sleep since this bill was announced," said George Hancock, recently retired founder of Pyramid Breweries in Seattle's Sodo district and past president of the Washington Brewers Guild, which represents most of the state's estimated 80 breweries, from Silverdale to Sunnyside.

"Our members are looking at this and saying, 'This is the end of our business' -- and frankly, they're absolutely livid," Hancock said.

Mary Lou Dickerson, HB1255's prime sponsor after being asked by the Governor's Council on Substance Abuse, said the bill is not governor's request legislation. She has already revised it to exclude microbreweries that produce fewer than 60,000 barrels a year -- meaning most of the state's breweries wouldn't pay the increased tax.

"It may never get a hearing; there's no huge push in the Legislature for this," Dickerson said.

On the other hand, shesaid, "there is a need to pay for the ravages of substance abuse. This is one of a whole host of options that are being looked at."

Recent frothing over the beer tax shows how state business and budget-balancing policies are clashing, making microbreweries a microcosm of the state's fiscal crisis.

Brewers say Gov. Gary Locke and policy-makers have urged the kind of business diversity and job creation the beer industry represents, while "killing us off" with tax increase proposals.

"The tax proposal and economic development policies are completely at odds," said Dick Cantwell, head brewer and owner of Elysian Brewing Co. on Seattle's Capitol Hill.

Paul Shipman, founder of Red Hook Brewery in Woodinville, the largest brewery in the state, said the tax increase would mean trouble for many breweries and would be a huge step backward at a time when the industry needs "a more nurturing environment," not less.

"What we need is more support from the state; the state of Oregon supports its microbreweries, and they are thriving," said Shipman, who is firmly against the excise tax increase.

"It's good public policy to create an environment where small local producers can compete; it ultimately makes the whole state more prosperous."

The "sin tax" increase is being sought by the Governor's Council on Substance Abuse to provide money for chemical dependency treatment and prevention programs. Supporting such programs, advocates say, helps individuals, strengthens families and can save the state costs for foster care, prison, court and other human services.

HB1255 would raise two of three segments of the state beer excise tax, with the majority of the increased revenue going to the state's account for violence reduction and drug education.

The account now receives $6.5 million each year from a $2-a-barrel excise tax. HB1255 would raise the tax to $24.36 a barrel, bringing in an estimated $79.2 million each year.

The proposal would also raise a portion of the tax that goes to cities, counties and law enforcement on border towns from the current $1.30 a barrel to $2.60, doubling the revenue from $4.2 million a year to $8.45 million.

The bill has not yet been scheduled for a hearing in the House Finance Committee; March 5 is the cutoff date for bills to pass out of committee.

Brewers say the proposal did not analyze the potential impact on an industry that employs about 20,000 people statewide, with an annual payroll estimated at $367 million, including brewers, bottlers and other production staff, truck drivers and sales staff.

"We're asking lawmakers to vote no on any additional beer tax," said Charlie Sullivan, owner of Skagit River Brewery in Mount Vernon, citing the "differential in support between Oregon and Washington" as well as brewers' fears that contraband sales will increase if the measure passes.

Hancock said the costs of doing business in Washington are so high, Pyramid is expanding -- in California, where the excise tax is $2 a barrel.

"To go after one segment of the industry and destroy it in the name of raising a relatively small amount of money doesn't make any sense," Hancock said. "We've already lost breweries and the state lost 8,300 restaurant jobs last year because of the economy. Now is not a good time to be doing this."


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