Will voters swallow seven buck Chuck?

Could California’s wine excise tax increase 12,600 percent?

If Josie and Kent M. Whitney have their way, it will. According to the Sonoma Valley Sun (via wineopinions), the Secretary of State has cleared their ballot initiative that would raise the excise tax on a regular bottle of wine from four cents to…$5.11. They estimate this would raise $7 – $9 billion for the state’s coffers. (See more on the proposal at ballotopedia.org)

The only thing standing in the way of this rise is the fact that the Whitneys need the signatures of 433,971 voters — and then half the votes on the referendum in the fall.

While excise taxes might be the type of strong brew that only a few politicians can raise, it’s extremely unlikely that voters would really want to raise these taxes in such a drastic manner both out of their own self-interest and protecting the local industry. (If the mild reversal in California’s budgetary woes reported on Bloomberg today continues, any popularity for the initiative could be dampened.) But where there is no local wine industry, excise taxes do have a habit of creeping up every year…

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31 Responses to “Will voters swallow seven buck Chuck?”

  1. Wow. I guess a sin tax might help state coffers but I don’t see this going anywhere but down.

  2. And I thought in my country taxes were high…

  3. Taxes on wine, in any shape or form, will change the buying habits of consumers. Putting a stranglehold on wine industry of CA is another topic that would affect livelihood of thousands…

    In Korea, where there is 67% tax rate that includes tariff, education tax, liquor tax and VAT, two buck chuck is hitting retail shelf at $13. Crazy you say. That’s why consumers flock toward cheap, cheap manipulated wines born out of chemical lab while missing out on sort of naturally made, sustainably grown small wines which can’t compete on price.

    Back to CA, it behooves me the conversation to raise tax on wine is even around. Josie and Kent M. Whitney must not be wine drinkers.

  4. A $5.11 tax on a bottle of wine is absurd! What makes people want to control everyone else and make them adhere to their “morals?”

  5. If this goes through, I imagine a lot more California wine will be sold in Nevada, to Californians…

  6. PS: If Californians really want to help the budget, they should vote to legalize and tax marijuana. This initiative has already been approved and will be on the fall ballot.

  7. We will find out more about these nitwits in good time. Chances are that they are of the same ilk that thinks they pay too much in other taxes, oppose health care and drink tea totally.

  8. It would also double the price of a six-pack of beer! There’s no way this will get on the ballot.

    In reality it would create huge market distortions and wouldn’t raise nearly as much tax revenue as they predict. There would be a bustling black market and people would shift their alcohol-buying out of state.

  9. El Jefe – raising the excise tax a bazillion percent would certainly foster a gray/black market for wine…But I thought what happened in Nevada stayed in Nevada?

    Travis and others – Yes, per bottle taxes are regressive, hitting the low-end wines the hardest. (Harlan consumers won’t likely stop drinking it as a result whereas Two Buck Chuck consumers would.) In the UK, for example, such a regressive tax aims to discourage volume consumption and makes it hard for wine to undercut lightly taxed (nay, subsidized?) beer. Even though the 67% tax in Korea is frighteningly high for all wine consumers, it’s really mostly frightening to Harlan drinkers.

  10. So let’s suppose that they can get it on the ballot (which is virtually impossible unless they have paid signature gatherers). You’re going to have the restaurant associations, the wine retailer associations, the wine wholesaler associations (with big $$$ from Southern), the beer producers and distributors, the wine producers and grape growers associations, etc. all funding ads against it talking about how it will cripple CA’s economy. Who’s going to pay for ads to counter them??? It ain’t happening.

  11. It is important to note also that NO PART of this will help California’s budget woes, because all of the money is earmarked for anti-alcohol programs and similar measures. If they had really wanted this to pass they would have a) started with a much smaller amount and b) had the bulk of the funds go straight to state coffers.

    Frankly, el Jefe’s suggestion has much more merit from a budgetary point of view (of course its also better-funded, better-drafted, etc. which speaks volumes as well)

  12. Tom Wark has a long commentary on this topic in his blog, FERMENTATION. It is worth a read for those who would like to delve further into this ballot initiative.

    Its chances of qualifying to be on the general election ballto are about fifty-fifty in my opinion because anyone who stops to read the petition will not sign it. But, its chances of passage are probably low enough to not worry unduly. As Mr. Wark points out, however, there is an argument for a modest change in taxes on alcohol since the rates have not changed in 20 years.

  13. It has a good chance to get on the ballot because there are enough do-gooders out there to volunteer to collect signatures, and enough people who don’t consume alcohol to not care what $25.60 per gallon really means to them. Assuming they even read what they are signing… “Raise taxes on something I don’t care about? Where do I sign?”

    Charlie – Raising tax rates just because they haven’t changed in 20 years is not a good argument. By that logic all tax rates would rise to 100%.

  14. Alas, this proposal is clearly the work of religious wackos. Such a tax would kill the wine industry and dramatically impact tourism. Oh, and it would actually decrease revenues from excise taxes, too. But oh, sacrifice is necessary so we can return to Prohibition, which obviously worked so well… ;-p

  15. […] 7 Buck Chuck?:  Dr Vin0’s take. […]

  16. “Raising tax rates just because they haven’t changed in 20 years is not a good argument. By that logic all tax rates would rise to 100%.” I do believe that wine prices have risen substantially in the last 20 years, and so the tax, four cents a bottle, is a much smaller percentage of the cost of a bottle than it was twenty years ago. One can raise the tax substantially without even getting back to the percentage it represented 20 years ago, much less approaching 100%.

  17. Hopefully even nondrinkers will realize the wide ranging effects of this proposed tax on businesses in California and vote it down!

  18. My dream is a California ballot initiative that eliminates the right to ballot initiatives. Starting with Proposition 13, they have screwed up this state more than anything politicians have done.

  19. hi Claude – This is true, it’s just not the right reason to raise taxes. Kind of like raising prices because I haven’t raised prices in a while.

  20. It is wrong, in my opinion, to be opposed to a small and reasoned increase in the tax on wine in CA. Taxes exist to pay for services. Unless one wants to argue for a complete repeal on all taxes that are specific like gasoline, telephone, alcohol, for example, then the appropriate question is how much tax. In the case of taxes on wine, four cents is a ridiculously low amount and could easily be raised to eight cents, about the inflation rate, without making a dent in wine sales.

  21. HAHAHAHA. This will never in a Million years pass. They have been trying to do this for many years and it will never happen if they can’t come up with realistic numbers.

  22. Btw, apparently signatures can be collected for $1 each (see here http://bit.ly/cYLaqx ) so it’s not really a lot of money to get this on the ballot…where it would meet a crushing defeat.

    Blake – good idea!

  23. How do they get the $9B raised – is this tax on every bottle produced and exported? $9B divided by $6 = 1.5B bottles. Does California consume this much? This is around 35 liters per capita which seems high. Taxing exported products is kind of backwords don’t you think?

  24. I live in a jurisdiction with a flat tax per bottle and what this means is the low end gets killed. Above $20 or so wine becomes a managed consumer good and the prices are pretty constant across jurisdictions. If a progressive tax were to be implemented I don’t think the Harlan drinkers have anything to fear. Harlan on the other hand would have lots to fear.

  25. “hi Claude – This is true, it’s just not the right reason to raise taxes. Kind of like raising prices because I haven’t raised prices in a while.”

    But we’re not really talking about raising taxes, just about restoring them to to where they were 20 years ago (in real, not nominal, terms). As Captain Blue notes, a progressive tax is fairer. A tax based on percentage of wholesale price would be such a progressive tax and would have the advantage of automatically adjusting for inflation.

  26. Maybe the analysts[sic] are figuring on the huge public switcheroo to buying out-of-state and online purchasing for most of their billions in revenue.
    It surely will have the effect of putting a rather large number of tax-paying, employment-producing, tourist-attracting wineries out of business.

  27. […] Dr. Vino, who wonders if Trader Joe’s will end up selling seven-buck […]

  28. What’s really funny is….all of the wine blogs are giving this proposal lots of free publicity!

  29. I wrote about this, and followed up the next day with a look at who was behind the initiative. Fark and other forums and sites linked to my posts, and my traffic has been huge as people try to figure out what goes on inside of an asshat’s brain, or in this case a pair of asshats.

    First, not that it matters much in impact, but let’s pretend all wine writers can do math instead of copy each other’s incorrect numbers. $.04/$5.11=100%/12,775%. Just edit in the correct number, and if enough of us are using it, soon everyone will.

    It would cost about $650k to signature qualify this initiative for November’s ballot, and if on the ballot it stands virtually no chance of passage. Ten years ago, I would have laughed at the thought of Arnold Schwarzengger being elected as my Governor. strange things happen.

    Due to loss of commerce, impartial analysts forecast a loss of hundreds of millions of dollars in tax revenue. It appears that the authors have crafted a neo-prohibitionist sin tax, perhaps fueled by fundie sentiment, and may stand to see financial benefit if the initiative were to receive a majority of votes cast.

  30. The Massachusetts legislature recently applied the 5% sales tax to alcohol. This tax was in addition to state excise taxes and was sold as “reversing the alcohol sales tax exemption”. Of course it was also derided as double taxation (including a tax on a tax) by opponents and we will have a ballot initiative to repeal it this year. It looks like the repeal has a good shot, but this is the state where voters rejected selling beer and wine in supermarkets, so I’m not holding my breath.

  31. Unfortunately, these type of sales taxes are going to continue being part of the national conversation. We have politicians (or want to bee’s) like the guy who started Move On that is running for governor basically on the platform that he’ll increase taxes. It’s certainly an interesting time to be an independent in California.

    All that being said, no chance this gets passed. For all the talk, whenever something like this goes on the ballot it loses huge.


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