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Industry rallies to stop new wine tax — but should it?

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A funny thing happens when liberals in the wine industry — and there are a lot of them — are faced with the prospect of higher taxes on alcohol.

Suddenly, their inner conservative emerges.

I expect that’s what’s going to happen if the Congress and the Obama administration try to raise excise taxes on wine, as was widely reported yesterday.

The Senate Finance Committee, which is charged with finding the money to pay for the healthcare promises President Obama made, is reportedly looking at “lifestyle tax proposals” that include a rise in the current federal tax of 21 cents per 750 ml. bottle of wine to as high as 70 cents. (California, which currently taxes wine at 20 cents per gallon, also is considering an increase.)

This is going to be a big fight, bringing out all the Usual Suspects: retailers, wholesalers, the Wine Institute and their allies will rally to the no-tax position. Against them will be the junk scientists at the Center for Science in the Public Interest and other anti-alcohol types, as well as good government types who sincerely want to use the new funds to provide healthcare to the tens of millions of Americans who are uninsured or under-insured.

That’s where the discomfort level comes in for the industry. The wine industry is commendably good at raising money through charities, such as wine auctions, to help farm workers with their healthcare, and no doubt the tens of thousands of mainly Mexican field hands whose sweat lets us enjoy wine have benefited hugely from the industry’s compassion.

But such charitable giving makes only a small dent in the nation’s healthcare crisis. Granted, it’s ridiculous for the Congress to sugar-coat a tax increase by calling it a “lifestyle” adjustment. But we all know the country is broke. If we’re sincere about bringing healthcare to everyone in America, then the money has to come from someplace. President Obama has been telling us that we’re in this together and we’re all going to have to sacrifice to get out of it. That includes the wine industry. I realize that other bloggers are going to come out swinging against the tax increase, and they will express outrage that wine is being lumped in with Gatorade and Coca Cola. But I think we need to step up to the plate, take our fair share of the hit, and be counted.

Decades ago, the conservative Democratic Senator, Russell B. Long, quipped, “Don’t tax you. Don’t tax me. Tax that fellow behind the tree.” That’s what we’re going to be hearing from the wine industry, if this tax proposal moves forward. “Tax soda! Tax cigarettes! Tax candy! Tax anything you want, but don’t tax wine!”  We can do better.

Dept. of Thanks, but No thanks

From the Sonoran [Arizona] Alliance:
Republican Professionals: “Politics on the Rocks” is proud to announce that we are having a wine tasting event in Old Town Scottsdale on Thursday, June 11th at 6:00 PM. Come join us for a fun evening of “Conservatives & Cocktails.”

Umm, I’m busy that night.

  1. I’m one of those liberals that is not against the tax, but I also think we should be taxing the medical use marijuana industry that is racking in like thirty grand…a day, (in my area anyway) in cash, so what do I know. If some good can come from the bottles of wine I buy, I don’t mind paying a little more per bottle.

  2. Samantha, I agree about taxing pot. If any State can do it, it’s California. I think even Schwarzenegger said he’s open to the idea.

  3. Couldn’t disagree with you more on this one Steve, but then that’s to be expected since producers are the one’s that stand to lose the most.

    The problem with targeted sin taxes in general is that it punishes some people and industries based on what the current stock of politicians believes is “good” or “bad”. Also, sales taxes are regressive, which means the poor are the hardest hit. Obama promised that only the top 5% would see taxes go up, will he stick to his guns on this?

    If we are going to raise taxes, lets not target industries and use moral arguments about some being bad and thus more deserving of seeing their growth stopped or slowed. Let’s all, truly, collectively get on board.

    But that won’t happen, because collectively we don’t want to as a nation. Obama knows this, Congress knows this. So they couch their taxes in moral terms in the hope that folks will support punitive taxes on the industries they don’t like. What if neocons passed a national tax on gay marriages (in states where they are legal)? Morality based taxes are a nightmare for a free society.

  4. As an employed citizen working 60-70 hour weeks, I have been funding (and providing) health care to many people while not having the time (and at times, insufficient coverage) to receive care for my own health reasons.

    This year, in light of California’s financial woes (and against stronger instincts), I did not file a state ta return because I felt that the money I would have received as a return in was my silent contribution to the state’s dwindling funds.

    If this tax passes, I will file and seek the refund owed me.

  5. Matt Ortman says:

    I understand we have a problem with budgets and spending in both CA and at the national level, and also realize money must come from somewhere. The problem I have with the tax is where it it imposed, at the first point of sale.

    What this means to wineries is that they must pay money as wine is removed (sold) to another party be it a consumer or distributor. If it passes at the 70 cents per bottle and we sell a pallet of wine to a distributor, who will then pay us 30-100 days after it ships, we must pay the feds $470. We are small and we invest everything we have in what’s in the bottle. Having to pay more money to sell wine is a tough pill to swallow.

    Also because it is at the first point of sale it raises the price of wine $1.00 to $1.30 to the consumer if run through traditional three tier distribution. This extra dollar can be the breaking point in someone’s buying decision, unless everyone decides to “trade up” in pricing just because taxes increased. How about taxing the final point of sale, where it won’t affect buying habits as directly?

  6. Define “us” and “we” :)

    The idea of taxing people’s lifestyles is bound to the idea of legislating morality. How do you tax a lifestyle without judging it? Removing the “lifestyle” moniker doesn’t help – the tax is being considered to help pay for a state run healthcare system – a morality tax to pay for a morality benefit.

    How about instead a tax on body fat percentage measured by your state established doctor and reported to the IRS? That system would be far more directly correlated with health issues, and so far more fair. Just politically unpalatable. So much for the new order of pragmatism.

    But taxing liqour? Instead of calling it a “sin” tax this time, it will be called a “lifestyle” tax… It’s still state-established dogma, whether it comes from the political right or the left.

    Sigh. Hopefully it’s a non-starter. Otherwise , I guess I’ll be leading a state-defined alternative lifestyle.

  7. Steve,
    I meant to say they are racking in 30 grand a day per store…and there are loads of them here, not that I know any, (looking over my shoulder) but I think those people would be fine paying a exrtra couple bucks per ounce.

  8. I just did a brief blog about this today too – regardless of how anyone feels about this, I think there is NO doubt it will happen on both a state and federal level. Hopefully the stupid “nickel a drink” tax won’t see the light of day again – it would KILL us; but the state is in dire straits. My question is – what will be the industry reaction? Certainly most wineries with lower-priced items will be forced to pass it through, and wine prices will go up. But can some higher end wineries afford to eat the tax increase, at least for awhile? Some may say this is nutty thinking, but holding off even 6-12 months may be worth considering if you can afford it.

  9. Eric, I’m 100% in favor of taxing body fat, since I have very little!

  10. By the author’s comments and by those made by others, I have to wonder this: Does anyone really know what they are talking about??? More taxes!!! Don’t you realize the money paid in taxes is pulled out of the private sector. That means it can’t be used for increasing this country’s wealth. I cannot believe that our citizens are so dumbed down and dimwitted enough to buy into this garbage. Wake up folks. The country is in a recession. That means the economy is shrinking. But guess what is not shrinking: The Governmnent. It never shrinks. It only gets bigger and bigger until it squeezes all the pulp out of society. What kinda wine do you think you get out of third press. The same kinda universal healthcare you’ll get from government. While bankrupting the country to boot.

  11. Liberal Larry says:

    Let’s eliminate all income tax, excise tax, jedi knight training tax, etc and institute a massive sales tax on everything. That way, those that consume the most will pay the most. Seems fair, right? Hmm, wait… that will never pass Congress, there’s no way to cheat the system.

  12. Liberal Larry, I’m with you on that.

  13. How easily the pseudo intellectual non-producers wish additional burden upon the producers. No society has ever taxed itself into prosperity yet, the sirens of Camelot still beckon those already lulled into ennui at the public trough. Wine is the value added preservation of the grape.
    Wine is food. It has always been so. Only fools bite or sever the hand
    that feeds them. Sure, diminish the farmer…eat Soilant Green.

  14. On an economic point of view it has been proven again and again that a taxe hike stiffles competition and increases pressure for change in a given industry. As a result we will probably see a slower wine industry growth and increased consolidation. Is that good or bad, I don’t know, it will be what it is.

    Beyond the increased cah advance that winery will have to pony up, the $0.7 hike per bottle could translate to $1.3 on the shelf (based on regular distribution and retailer margins). That would have a tremendous impact especially in a difficult economic environment forcing producers to eat most of that (not the consumer) and reducing their margin. Lower producer margins means lower industry growth and investment; some companies will fail and/or be sold off.

    I am not against the tax hike, just very concerned about it. I would be less concerned if the market was free, but the combination of distributor consolidation, archaic laws in many states, a tough recession and a tax hike might be the kiss of death for medium sized family owned wineries.

    N

  15. Liberal Larry says:

    Let’s be realistic. Many of you who are posting are owners of small to medium sized wineries with retail sales of ~$20.00/bottle. You will simply pass the cost to the consumer, practically all of which won’t even notice the % increase. In response, with government-supplied health care, you won’t offer health care to your employees anymore. In the long run, you come out ahead. Why are none of you complaining how much tax you are giving to the government to fund a massive war effort?

  16. Carson Smith says:

    Connecting tax increases to healthcare promises made by Obama is just marketing. Healthcare improvements are hard to argue against for many people and “sin taxes” sound like an appropriate means to fund those improvements to those people since those “sins” are connected to increased healthcare costs. In reality it is just a sales job to pass tax increases which will not necessarily end up being spent on the targeted program and whatever healthcare program the government sets up it will cost much more that they predict in the beginning.

    President Obama could just break his “healthcare promises” it would not be the first nor the last of his promises broken.

  17. Jeff Murphy says:

    Perhaps they could start by cutting spending on BS, Pork, all of the congress/pres. “education” trips, staff, mulit million inauguration parties, hair cuts, ………the list goes on and on. Billions dumped into cities…that cannot be tracked. We are already taxed enough, learn to spend wisely.

  18. Jeff Murphy says:

    Oh ya, Liberal Larry is right. One tax on consumption, flat tax. No way around it.

  19. Liberal Larry says:

    “Connecting tax increases to healthcare promises made by Obama is just marketing”

    Yes! But there are varying degrees of “truth” aren’t there? It’s ironic how most Americans have become complacent with the thousands upon thousands of dollars they have given Bush each tax year for the biggest propaganda piece in generations (WMD / Al Qaeda in Iraq), but we’re concerned about 50 cents per bottle of wine to care for the health of our citizens? I’ll believe Obama over Bush any ole day of the week.

    Oh, yeah – if we ever do get government health care, be prepared for a massive reduction on your private health care premiums. That kind of competition will be the best thing to happen to those that are still offered private health care through their employers. Hmm… competition, greater efficiency.. that’s a conservative principle isn’t it? That 50 cents is money well spent.

  20. Morton Leslie says:

    We all know a sedentary lifestyle leads to obesity and health problems, that’s why we should all support a special excise tax on chairs.

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