PUBLIC HEARING: HB 2152

 

TAPES 165-166, A-B

 

SENATE REVENUE COMMITTEE

August 12, 2003   2:30 PM   STATE CAPITOL BUILDING

 

Members Present:                        Senator Ryan Deckert, Chair

                                                Senator Ted Ferrioli, Vice Chair

                                                Senator Tony Corcoran

                                                Senator Rick Metsger

                                                Senator David Nelson

                                                Senator Charlie Ringo

                                                Senator Bruce Starr

 

Members Excused:                      Senator Lenn Hannon

                                               

Witnesses Present:                        Paul Romain, Oregon Beer and Wine Distributors Association

                                                Karl Ockert, Bridgeport Brewery

                                                Irene Firmat, Full Sail Brewery

                                                Diane Belt, Oregon Association of County Tax Collectors

                                                Gary Bartholomew, Oregon Association of County Tax Collectors

                                                Jim Bernau, Oregon Wine Association

                                                Sandra Bishop, Wine Institute

                                                Gil Riddell, Association of Oregon Counties

                                                                       

Staff Present:                            Paul Warner, Legislative Revenue Office

                                                Dick Yates, Legislative Revenue Office

                                                Mazen Malik, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Tara Lantz, Committee Assistant

 

TAPE 165, SIDE A

 

003

Chair Deckert

Calls meeting to order at 2:40 pm.

 

OPENS PUBLIC HEARING ON HB 2152

 

018

Paul Warner

Discusses the original bill and the –A9 amendments (Exhibit 1), which constitute the Senate Revenue plan. Discusses each portion of the bill beginning with the means test elderly medical deduction. Refer to Senate Revenue Plan (Exhibit 2). Refers members to a Major Components fact sheet that gives details about the bill (Exhibit 3). Discusses the SUV depreciation portion of the bill.

 

 

 

066

Sen. Ringo

Asks if the revenue impact should be bigger with the removal of the federal impact.  

 

 

 

070

Dick Yates

Responds that it was taken into consideration and that the federal tax break is still substantial and should not affect the use of the credit.

 

 

 

085

Warner

Discusses the federal tax subtraction and changes that were made last year. Explains the reduction of the personal exemption credit and discusses the revenue impact. Discusses the personal income tax standard deduction, the income tax brackets, and itemized deductions. Discusses the increase in the corporate minimum tax, extraterritorial income, the reduction in corporate credits.

 

 

 

176

Sen. Deckert

Asks about the carry forward for tax credits.

 

 

 

178

Lizbeth Martin-Mahar

Responds that there is a three year carry forward on the credit.

 

 

 

195

Warner

Discusses the property tax portion of the plan.

 

 

 

211

Sen. Ferrioli

Asks if the counties calculate the discount and send money back to the state after the distribution of taxes to the special districts.

 

 

 

219

Mazen Malik

Responds affirmatively.

 

 

 

222

Sen. Ferrioli

States that there are some times when taxpayers successfully appeal their property taxes and get a rebate, and asks if there is going to be a problem for the counties with this change in the law.

 

 

 

235

Warner

Responds that there are representatives from the county collectors that can talk to that issue later.

 

 

 

240

Sen. Deckert

Asks if the distribution goes to the state school fund and then the General Fund.

 

 

 

242

Warner

Responds that it goes 2/3 to the General Fund and 1/3 to the state school fund and points out that it is only a 1 year adjustment.

 

 

 

254

Warner

Discusses the beer and wine tax and the medical provider charge.

 

 

 

292

Sen. Corcoran

Asks about the lottery discretionary funds.

 

 

 

295

Warner

Responds that this bill does not include that and that it should be drafted in another bill.

 

 

 

302

Sen. Corcoran

Asks if there is an assumption made that the education stability fund would be increased by some additional lottery revenue.

 

 

 

306

Warner

Responds affirmatively.

 

 

 

325

Sen. Corcoran

Asks if the methodology to come up with an additional $23 million uses the assumption of adding another machine, line games, or compensation.

 

 

 

334

Warner

Responds that those ideas have been discussed and this estimate uses the revenues that can be raised with those types of activities.

 

 

 

347

Sen. Corcoran

States that he has concerns with the legality of using PERS savings from other fund agencies and moving those into the General Fund. Asks if there was any discussion on this.

 

 

 

361

Sen. Deckert

Responds that in talking to Legislative Fiscal, they can get the money but they would need to make a statutory change and it would be done in Ways and Means.

 

 

 

370

Sen. Nelson

States that this bill is convoluted and that there must be a better plan out there to fix things. Asks how in good conscience they can consider this.

 

 

 

390

Sen. Corcoran

Asks how in good conscience they can consider the deaths that they have seen and not do anything.

 

 

 

397

Sen. Nelson

Responds that he is not against potential revenue increases but is against this bill.

 

 

 

402

Sen. Deckert

States that they took most of this from the House plan and was it was a bipartisan agreement to get to a balanced budget.

 

 

 

410

Sen. Nelson

Responds that there is more than one way to do it and they wouldn’t be doing their job with this package.

 

TAPE 166, SIDE A

 

011

Sen. Corcoran

States that if they delay the Bush tax break plan fifty percent for two years it would take care of the whole thing.

 

 

 

030

Paul Romain

Testifies against starting any revenue raising measures in the Senate. Testifies against the increase in beer and wine taxes because Oregon has the number one micro-brewing industry in the nation and is one of the highest growing wine regions because they have low taxes. States that an increase in taxes will cause a decrease in the industry, creating a loss in jobs and revenues. Discusses the average wages in the distributing business.

 

 

 

085

Karl Ockert

Gives history of the Bridgeport Brewery and discusses their financial statistics. Testifies against the increase in beer and wine taxes because it would hurt a vibrant local industry, it singles out the industry, and it would cost his business an additional $150,000 in taxes.

 

 

 

144

Sen. Ringo

Asks for an estimate of the financial size of the company.

 

 

 

155

Ockert

Responds that their payroll is approximately $2.5 million annually.  

 

 

 

159

Firmat

Responds that Full Sail will see an increase in of $175,000 and are an $11 million company with a $2.2 million payroll. States that this would cause a decrease in Oregon investment.

 

 

 

178

Sen. Deckert

Asks how this tax would compare with Washington and California.

 

 

 

180

Firmat

Responds that California’s tax is $6.20 and Washington’s is $8.08.

 

 

 

185

Sen. Deckert

Asks if the sales tax in those states makes a difference.

 

 

 

188

Firmat

Responds that a sales tax is different because it is across all products and is added on to the total of the purchase. Discusses the distribution process and states that the costs would be marked up through the process, making the end cost to the consumer higher than the tax itself.

 

Discussion follows.

 

 

 

200

Sen. Ringo

Asks why costs would be marked up through the distribution process.

 

 

 

215

Firmat

Responds that wholesalers and retailers work on a percentage mark up.

 

Discussion follows.

 

 

 

231

Sen. Ferrioli

Clarifies that the distributors and retailers only look at a unit cost and mark up a percentage of the unit cost.

 

 

 

240

Romain

Explains that an excise tax is not consumer friendly because it gets marked up throughout the system.

 

Discussion follows.

 

 

 

293

Sen. Metsger

Asks how the panel views the strength of the Washington microbrew industry.

 

 

 

305

Firmat

Responds that it is very different because it didn’t grow have such a groundswell of companies and that a few companies were able to get a jumpstart with much higher financing.

 

 

 

329

Sen. Metsger

Asks how the tax increase would impact the industry if it were lower than all the surrounding states.

 

 

 

345

Firmat

Responds that it would weaken the industry because they would have less money to invest in becoming more efficient. Points out that the two largest companies in Washington are public companies and are able to operate at a loss.

 

 

 

355

Sen. Metsger

Asks at what price the excise tax becomes problematic for the brewers.

 

 

 

366

Firmat

Responds that it would be hard for her to say that any increase would be a positive thing for them. Gives history of Full Sail Brewery.

 

TAPE 165, SIDE B

 

009

Romain

Discusses the loss of jobs that will occur if the tax is increased, citing Widmer Brewery as an example.

 

 

 

036

Diane Belt

Testifies that counties have the most concern about the discount rate portion of the bill and wish the legislature would just pick a number rather than make the process more complex with a variable rate. States that there needs to be a rule dealing with the issue of appeals and refunds.

 

 

 

070

Sen. Ferrioli

Asks if the Department remits an assessment to the state for other purposes.

 

 

 

073

Belt

Responds that it is not an assessment but a portion of the interest.

 

Discussion follows.

 

 

 

100

Sen. Deckert

Asks what the discount rate should be.

 

 

 

105

Gary Bartholomew

Responds that a one percent rate would decrease the number of citizens taking advantage of the discount rate.

 

 

 

120

Belt

States that the federal rate is 1.5%.

 

Discussion follows.

 

 

 

142

Paul Romain

Discusses the current wine tax structure in the state which exempts wineries that produce less than 40,000 barrels.

 

 

 

180

Jim Bernau

Testifies against an increase in wine taxes because he would not be able to pass the costs on to consumers due to his size.

 

 

 

206

Sen. Ringo

Asks what the increase per bottle for Bernau would be.

 

 

 

210

Bernau

Responds that he didn’t calculate it because he can’t pass the cost on. States that for the first time in history, sales in wine have declined. Discusses the wine industry in Oregon and states that it has been successful because of tax policies. Gives history of Willamette Vineyards.

 

 

 

321

Sandra Bishop

Testifies against the wine tax increase because it would put many small wineries out of business. States that the increase per bottle would be between $1 and $2, bouncing the bottle of wine out its price point. Declares that this is not a consumption tax, but rather an excise tax.

 

 

 

410

Sen. Deckert

Asks if the reason there is a high concentration of wineries is because of the tax structure.

 

 

 

416

Bernau

Responds that there are a lot of small wineries because they are exempt from taxes, but very few large wineries.

 

 

 

426

Bishop

Speaks to the competitive disadvantage of Oregon wines compared to foreign wines.

 

TAPE 166, SIDE B

 

043

Sen. Metsger

Asks if anyone supports the beer and wine tax increase.

 

 

 

049

Gil Riddell

Testifies that the counties support a beer tax dedicated to public safety and health services that deal with the problems that stem from the consumption of the product.

 

CLOSES PUBLIC HEARING ON HB 2152

 

065

Sen. Deckert

Adjourns meeting at 4:06 pm.

 

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

  1. HB 2152, Sen. Deckert, Proposed HB 2152-A9 Amendments, 56pp.
  2. HB 2152, Paul Warner, Senate Revenue Plan, 1p.
  3. HB 2152, Paul Warner, Major Components of the HB 2152 and the –A9 Amendments, 4pp.