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Governor’s excise tax would bury California wine industry

When California Gov. Arnold Schwarzenegger leaves office and resumes his movie career, I have a perfect script for him — Jackass 3.

The governator could star and his supporting cast would be the current stable of state legislators (hopefully all termed out). Just about the time you think the people running California state government could not get any more absurd and inept, they prove you wrong.

California is approaching economic gridlock; bills are going unpaid in the wake of a mounting money shortfall, and state employees are being ordered to take unpaid furlough days.

The latest recommended way out of the economic morass mess is the governor’s proposed 5 cents per alcoholic drink excise/excess tax. Sounds harmless enough; a nickel tax on a shot of Scotch. No big deal.

Look through clear glass rather than the bottom of a shot glass and it becomes clear that this seemingly harmless way to raise money is actually a 640 percent tax increase on the state’s wine industry.

This idea has sent grape growers and wineries through the roof like a cork from a champagne bottle shaken by a paint mixer.

I am not going to debate ‘sin’ taxing liquor and wine, but the absurdity of the 5 cents per drink on wine is in the total lack of understanding of its impact on one of the state’s premier industries.

The tax strikes at the heart of the wine grape industry. Fifty-five to 60 percent of all the wine grapes crushed in California are grown from Lodi south — the San Joaquin Valley. Wineries are paying about $400 per ton for grapes grown in the region. Assuming 170 gallons are fermented from each ton, the nickel-a-drink tax would double the cost of the grapes to wineries.

Imposing the excise tax proposed by the governor would be like driving a D-10 Caterpillar through every vineyard in the Valley. It would all but destroy the state’s wine industry.

The governor’s proposed tax would have the most devastating impact on ‘everyday’ wines, those priced below $7 per bottle because the excise surtax would be levied on a gallonage basis.

According to the Wine Institute, the governor’s proposed tax would skyrocket the wine excise tax now from 20 cents per gallon to $1.48 per gallon.

This surtax would raise the average cost of a 9-liter case of wine by $3.04. Add in the normal distributor/retailer markups of 50 percent to 100 percent and the increase would be as much as $6.08 per 9-liter case or 51 cents per 750 ml bottle. Larger sizes like the popular 5-liter bag-in-box could increase by as much as $3.38 at retail, a 56 percent price increase.

This excise tax would bury the California wine industry. Unlike other businesses fleeing California because of regulations and the high costs of doing business here, you cannot call Bekins and move more than 500,000 acres of grapevines to Arizona.

The wine grape industry now generates more than $51 billion in economic activity for the state and already pays $3 billion in taxes while providing 300,000 jobs and more than $10 billion in wages.

Wine is not the only tax target. The governor is also proposing new taxes be imposed on golf fees, auto repair and veterinary clinics.

A casting call for Jackass 3 for should be posted immediately in the state Capitol.

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TAGS: Grapes
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