Updated: $5 tax on bottle of wine?


Say goodbye to

Two Buck Chuck

and dollar-beer nights
– it’ll be

Seven Buck Chuck

and two-dollar drinks if a proposed alcohol tax is passed by
voters this November.
Say goodbye to “Two Buck Chuck” and dollar-beer nights – it’ll be “Seven Buck Chuck” and two-dollar drinks if a proposed alcohol tax is passed by voters this November.

Slapping a five dollar tax onto every bottle of wine will do more than just ruin a brand’s nickname and dampen drink deals at local pubs – it’ll destroy the California wine industry, local vintners and alcohol retailers said.

If passed, the Alcohol-Related Harm and Damage Services Act of 2010 would increase the excise tax on a bottle of wine by 12,675 percent, from the current 4 cents a bottle to $5.11.

“I’ve never seen anything like this,” said Cheryl Murphy Durzy, vice president of sales and marketing at Clos LaChance Winery in San Martin. “It would put me out of business.”

The proposal would also impose additional taxes on beer and spirits, tacking nearly an additional $6 onto a six-pack of beer and an additional $17 onto a 750-milliliter bottle of distilled spirits.

“This can not pass,” wrote H. Geno Acevedo, president and brewmaster of the El Toro Brewing Co. in Morgan Hill, in an e-mail. “If it did, there would be no American craft beer industry and probably only one or two large industrial breweries might remain for a while.”

The initiative’s backers – listed as Josephine and Kent M. Whitney – need 434,000 signatures by Aug. 23 to put the measure on the ballot, according to the California Secretary of State’s Web site. According to the proposal, revenue generated by the tax would finance programs that address alcohol-related harms.

The text of the initiative cited $38.4 billion in alcohol-related problems in California alone as a major reason for increasing the tax.

“Anything that would increase the price of the product is a good thing,” said Dina Campeau, who sits on the board of the South County Collaborative, a group of nonprofits that advocates for access to health and human services.

Higher prices on beer and liquor would reduce access for underage drinkers, she reasoned. For years, South County Collaborative has been pushing for an increased tax and working to raise awareness about underage drinking and “alcopops” – sweetened alcoholic drinks marketed toward young drinkers. As for a tax on wine, Campeau said she didn’t have a strong opinion because wine isn’t typically something teens abuse to the same extent as beer and liquor.

“I don’t think (the tax) is exorbitant,” she said, adding that large alcohol companies have been “getting away with not paying their fair share of taxes for decades.”

As a result, taxpayers swallow the costs of alcohol-related health issues and the harm that is caused when alcohol companies market their product to underage drinkers, she said.

Although vintners said they understood a small tax – perhaps 10 cents per case – the numbers proposed in the initiative baffled them.

“The wineries are taxed to the hilt already,” said Gino Fortino, owner of Fortino Winery.

Building a business in an industry that is already heavily taxed at a time when the economy couldn’t get much worse hasn’t been easy, said Jason Goelz, winemaker at Jason-Stephens Winery.

“Last year I made zero dollars but paid about $70,000 in permit fees, licensing fees, excise taxes,” Goelz said. “This is why businesses are leaving California. Wine grows amazingly well in California and especially in Santa Clara County, so I can’t just pick up my business and leave. I also can’t charge my customers more and expect to keep them.”

Wine growers, breweries and bars would be forced to pass the tax onto their customers, local vintners said. That means about an additional dollar per drink at a bar, according to an analysis provided by the state’s Legislative Analyst’s Office. It would also mean paying $164 in additional taxes on a 15.5 gallon keg and could endanger marketing efforts such as BevMo’s 5-cent wine sales.

Although Gilroy BevMo Acting Manager Mike Hammond had not heard of the proposed initiative, “it would dramatically affect business,” he said.

“That’s quite a big bump,” he said of the proposed tax of $85.40 per gallon of distilled spirits as he flipped through a copy of the initiative.

Gilroy resident Enrique Santana only has a few beers on weekends, but if the tax passes, it would double the price of a six-pack, he calculated.

“I couldn’t afford that,” he said Thursday afternoon outside Charlie’s Liquors on 10th Street. “I would have to start cutting back.”

Solis Winery Co-owner Vic Vanni said it’s “unreal” how much he and his fellow wine growers pay in taxes and fees. Although he hadn’t yet heard about the new initiative, “nothing surprises me,” he said.

The proposed tax would as much as double the price of a $60 case of wine, said George Guglielmo, winemaker and president of Guglielmo Winery in Morgan Hill.

“It’s ridiculous,” said Guglielmo, whose grandfather started the winery in 1925. “So ridiculous that I don’t think it’s going to go anywhere.”

Even though the Legislative Analyst’s Office projected the tax would produce additional annual revenues of $7 to $9 billion, the new tax would likely cause a reduction in consumption. Decreased consumption means less money for the state, fewer jobs and more wineries going out of business, vintners said.

“I understand the need to raise taxes,” Murphy Durzy said. “The state is in a crisis – I totally get it. But let’s be reasonable. If this passed, it would destroy the California wine industry.”