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Oregon Liquor and Cannabis Commission considers doubling tax on hard alcohol

A display of bottles of whiskey at the James E. Pepper Distillery in Lexington, Kentucky. Health authorities in Oregon have begun a campaign to get people to think about the potential health impacts of their drinking habits this holiday season.
Jeff Dean
A display of bottles of whiskey at the James E. Pepper Distillery in Lexington, Kentucky. Health authorities in Oregon have begun a campaign to get people to think about the potential health impacts of their drinking habits this holiday season.

A month after lawmakers killed a bill that would have raised beer and wine taxes, state officials are considering increasing a tax on hard liquor.

The Oregon Liquor and Cannabis Commission marks up the cost of hard alcohol, about doubling the price for consumers. The markup includes a bottle surcharge of 50 cents. First imposed in 2009, it’s been renewed consistently since.

In her proposed budget, Gov. Tina Kotek called for doubling the liquor surcharge to $1 a bottle. A doubled surcharge would raise $90 million over the next two years, according to Kotek’s budget proposal. That money would go into the general fund and just about pay for her request of more than $100 million in new spending on behavioral health and addiction services in the next two-year budget, which starts July 1.

The commission will hear public comments about the proposal at its meetings on Thursday and in May. Public comments can be sent to Laura Paul at the commission at laura.paul@oregon.gov.

“We have to go through this public process to raise the price on spirits,” said Bryant Haley, a spokesman for the commission. “We expect to hear cost concerns from the industry on this change and from consumers.”

Industry officials have voiced their opposition to the proposed increase. David Ballew, CEO of Hood River Distillers, the state’s largest distillery, told Kotek, the commissioners and legislative leaders in a letter in February that Oregon has the highest excise tax rate on distilled spirits among states that control the price and sales of alcohol. He said Hood River Distillers does not have enough national sales to absorb an additional surcharge in Oregon, it’s chief market.

“Adding this new surcharge would put Oregon distilleries at a greater competitive price disadvantage that could lead to decreased sales, decreased shelf placements, and increased distillery business closures,” he wrote. “We urge you to prevent opportunities for Oregon distilleries to be squeezed out of our home market.”

Citing the Beverage Information Group 2020 Liquor Handbook, he said Oregon ranks 26th in the nation for total consumption of distilled spirits. But according to a national survey on alcohol and drug use conducted by the Substance Abuse and Mental Health Services Administration, Oregon ranked 5th nationwide in its rate of alcohol addiction among teens and adults in 2021. Only Washington, Kansas, Vermont and Colorado, in that order, have a higher rate of alcohol dependence.

That statistic is one reason the Portland-based nonprofit Oregon Recovers proposed House Bill 3312 this legislative session to raise the excise taxes on beer and wine to reduce the rate of alcoholism in the state. Beer and wine taxes are set in statute, unlike those for hard alcohol, which the liquor and cannabis commission controls.

“Alcohol is a toxic, addictive carcinogen and binge drinking costs the state economy $4.8 billion annually,” the nonprofit said in a release.

The bill was referred to the House Committee on Behavioral Health and Health Care, where it died last month without a public hearing or vote.

Mike Marshall, executive director of Oregon Recovers, bashed that move.

“It not only would have reduced consumption (that’s) at an excessive level, but it would have put money into primary prevention, which we’re not really funding,” Marshall told the Capital Chronicle.

He said raising the surcharge would help.

“It absolutely needs to happen,” Marshall said. “Spirits are more harmful than beer and wine. So when you raise the price of distilled spirits and you reduce the consumption, just like with tobacco, anytime anything becomes more expensive the excessive use of that goes down.

To be effective, though, he said the surcharge should skyrocket.

“It really should go up to $4 or $5 per bottle because the net effect of that would be to reduce distilled spirits consumption by 9.5%, which means that underage drinking and binge drinking would actually go down by a much larger percentage because they make up the two most price sensitive categories of people who drink,” he said.

That would not sit well with liquor companies in Oregon. Commission officials expect them to mount vigorous opposition to the 50-cent proposal.

How to comment

The Oregon Liquor and Cannabis Commission will hear public comments on the 50-cent surcharge at its Thursday meeting. To comment, email laura-paul@oregon.gov by Tuesday. Written comments can also be sent via email to Paul or mailed by June 5:

Laura Paul, executive assistant

9079 SE McLoughlin Blvd.

Portland, OR 97222

To attend the Thursday meeting, go to the agency’s address (above) or attend virtually by going online here. It starts at 9 a.m.

For more information, visit the agency’s meeting page.

The Oregon Capital Chronicle is a professional, nonprofit news organization. We are an affiliate of States Newsroom, a national 501(c)(3) nonprofit supported by grants and a coalition of donors and readers. The Capital Chronicle retains full editorial independence, meaning decisions about news and coverage are made by Oregonians for Oregonians.

Lynne Terry has more than 30 years of journalism experience. She reported on health and food safety in her 18 years at The Oregonian, was a senior producer at Oregon Public Broadcasting and Paris correspondent for National Public Radio for nine years.