U.S. considers wine tax hikes, while Bordeaux struggles

I don’t know — nobody knows — if Schwarzenegger’s excise tax hike on wine will pass. The Sonoma Valley Sun is reporting that the “potentially crippling state alcohol excise tax will be voted down this week,” but until there’s a budget deal in California, and there still isn’t one as I write on Feb. 18, all bets are off.

[breaking news: Thursday morning, Feb. 19: The Legislature just approved the budget. Not clear where the excise tax hike stands.]

The Governor’s proposed wine tax hike may be the most notorious in the nation, but one thing’s for sure: California is hardly the only state in the country looking to boost wine and alcohol taxes. Forbes.com reports that Idaho’s proposed wine tax hike just won a victory when the state Legislature approved moving it forward (taxes on wine would rise from 45 cents to $1.56 per gallon). That would put Idaho among the heaviest-taxed alcohol states, behind only Alabama, Alaska and Florida, according to this chart prepared last year by the Federation of Tax Administrators.

Other U.S. states considering a tax hike on wine or alcohol, besides California, include Indiana, West Virginia and Georgia, according to U.S. News.com. Colorado increased its alcohol excise tax collections without raising the rate, by the ingenious method of lifting a ban on Sunday liquor sales. But will raising booze taxes result in increased revenues for states? Not necessarily. Last year, Maine legislators jacked up prices on a bottle of wine by 7 cents and found themselves facing “a taxpayer revolt” as angry merchants and consumers “rallied to put an initiative on the ballot to repeal the measure,” U.S. News.com said. The initiative won, by a whopping 64 percent, and the tax hike was nullified.

In a related issue, New York State Gov. David Patterson’s proposal to allow the sale of wine in any store that sells beer (i.e., not just liquor stores, but grocery stores, drug stores, etc.) is tearing the Empire State’s wine industry in two. Liquor and wine store owners predict catastrophic loss of jobs and sales, while the proposal’s defenders point to an expected increase of $100 million in taxes, if the idea passes, says this report.

However, Patterson also appears to be considering a separate tax hike on wine. The Marin Institute (no friend of the wine industry) says “The governor also wants to see…taxes go up…on wine…from 18.9 cents per gallon to 51 cents per gallon,” a boost that would put New York just about in the middle of the Federation of Tax Administrators’ list.

Consumers already are devising strategies for pinching pennies without having to give up their daily tipple of wine. “The 3 liter premium wine

is showing tremendous growth,” growing at a rate of 32 percent despite the catastrophic fourth quarter of 2008, reports this blog. I can testify, after having reviewed many of the more popular wines-in-a-box, that they are for the most part good, clean, varietally-true wines that, at a retail price of $4 or $5 a bottle, represent value.

Anyhow, echoing the gloom-and-doom scenario comes this stunning, if not unexpected, headline from Decanter: “Bordeaux: wine boom may be over”

Among other bubbles (stocks, oil prices, housing, hedge funds) “The speculative bubble of Bordeaux’s great wines is currently exploding.” Thomas Jefferson must be spinning in his grave. “It’s going to be tough to sell fine Bordeaux this year,” my Wine Enthusiast colleague, Roger Voss, informs me. One death spiral is a domino effect described this way by a Berry Bros. & Rudd retailer: “All [Bordeaux] needs is a chateau or a negociant to go bust and it all crumbles.” Kind of like Lehman Brothers, last September. Any guess who it will be?

1. 

   Morton Leslie says:

   February 19, 2009 at 2:34 pm

   Obama should have explained to California Democrats that the Federal tax relief he included in his stimulus package was meant to encourage spending, not to be neutralized in Sacramento by increased state taxes.

   How about we give judges back discretion in sentencing and undo about a dozen other silly initiatives that we have passed over the last decade. Maybe when one is 40+ billion in the red one shouldn’t pass billions in bonds for a bullet train.
2. 

   Ray says:

   February 20, 2009 at 8:41 am

   Looks as though California’s two most valuable liquids have dodged
   the confiscatory attempt by the self indulgent legislative majority to
   levy their “sin” tax. For now.
3. 

   Mark Fisher says:

   February 20, 2009 at 9:52 am

   Steve: Kentucky just last week passed a tax hike on wine and other forms of alcohol that apparently came from out of the blue, to some degree — much to the delight of wine retailers in Ohio, whose customers made frequent “runs to the border” to stock up on sale wines.
4. 

   1WineDude says:

   February 21, 2009 at 5:57 am

   I fear this means that I will get ripped-off even more steeply by the PA government when I buy wine in-state…