Taxing the Vineyards of California to Oblivion

There’s a new initiative in search of signatures in California. The Alcohol-Related Harm and Damages Services Act of 2010 would increase the excise tax on a bottle of wine from .04 cents to $5.11. That’s an increase of over 12,000 percent.

This tax, as Jason Smith of Paraiso Vineyards notes, will hurt consumers of affordable wines. Say goodbye to the $7 dollar shelf. (If you prefer distilled spirits the tax will rise from 0.65 cents to $17.57 and the excise tax on a six-pack would spike from 11 cents to $6.08).

At first blush it may look like another attempt by government to use sin taxes to balance budgets. But this is a citizen initiative, and the proponents would like to take the anticipated revenues of roughly $8 billion to spend on alcohol-addiction programs.

The initiative’s authors are well-aware that raising the excise tax will raise the price and lead to less drinking (at least of California wines).

To get on the ballot half a million signatures  are needed by August. Beyond that, it’s unlikely to go far. A recent legislative proposal to impose a nickel-per-drink fee on alcoholic beverages was promptly rejected by the Assembly Health Committee.

The public seems unimpressed with the idea of a 12,000% tax hike on wine. One journalist by way of  explaining the initiative’s defects found meaning in its acronym.