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Californian winemakers slam proposals for 'devastating' tax rise
January 27, 2009
By John Abbott
Governor Arnold Schwarzenegger has faced angry opposition from Californian winemakers following the announcement that the state tax on wine could rise by up to six times the current rate.
The proposed tax hike –part of a plan to make up the $41.6 billion deficit of the state's budget- would see the levy on 75cl bottle of wine rise from 4 cents to 29.6 cents.
Winemakers have reacted angrily to the news, with many concerned that the increase would case 'great injury' to an industry that already contributes a significant amount to California's economy.
Local winemaker Don Galleano said that now was 'no time to tax one of California's signature industries.'
'The California wine industry has a $51.8 billion impact on the economy, and this is a time when we have people going out of business because of the poor economy.'
It is estimated that the state's largest winemaker, E&J Gallo Winery, would see an annual tax increase of $18 million under the new proposals.
A spokesman for the California Department of Finance defended the plans, saying they had been left with little choice.
'When you have to close a historic $41.6 billion budget gap, you can't do it by cuts alone. In a perfect world we might not do this.'
Robert Koch, president of the Wine Institute, described the proposals as 'devastating', saying that the plans had been worded 'to disguise a measure that would raise the state's wine excise tax by 640 percent.'
'California's wine excise tax would soar from 20 cents a gallon to $1.48 a gallon.'
'We understand the dire situation that the state of California is facing, but we strenuously object to the singling out of our industry.'
The tax applies to wine made and consumed in California, as well as wine shipped into the state. It doesn't currently affect Californian wine shipped out of the state.
Have your say...
To post your comment on this story, email us at news@decanter.com, making sure the relevant headline is in the subject field
 And yet, I'm guessing that quite a few of these winemakers voted for Obama, who will do the same on a national scale as the (some would say, ex-Republican) Schwarzenegger is doing in the state. Yes. They can.
Nancy Yos
In response to the increase from 4 cents to 29.6 cents per bottle tax increase, I say go for it. These challenging economic times call for draconian measures, not us worrying about a few cents tax increase. Let's all take a moment to look at big pictures to ensure the long term stability for all of us in the wine business. Let's focus instead on what the monies will be used for. A lot of winemakers and others in the industry probably received some tax breaks and incentives when they set up shop or expanded. Perhaps they are too quick in forgetting what they received.
Pram Acharya, North Charlevoix,USA
It's time to open up the rest of the country to allow California winemakers to ship their wines to every state unimpeded. End the residue of the prohibition era rules. This will help some of the hardships already facing California. Go to http:www.freethegrapes.com
Lee Tomkow
Yep, that extra 25 cents a bottle is really going to hurt!
Peter Shelley
They want to try operating in the UK with tax of £1.57 per bottle and set to increase still further come the budget in March!
Jon Atkinson, Merseyside, UK
After 17 years in the industry, last year I started a new winery in California—Birichino--making Malvasia Bianca here on the Central Coast, and I did not benefit from any incentives, tax breaks as one reader suggested. As a new business, I already generate new income to the State, and and a tax increase of this magnitude will severely impact my business. Margins are quite ruinously small for wineries like mine that don't benefit from governmental support as one often sees in Europe or elsewhere in the New World. I haven't owned the land for generations, and I don't benefit from economies of scale. An additional $3/case of new taxes will be devastating as it wouldn't be a level playing field and it doesn't affect any producers competing with me in my home market.
Alex Krause, Santa Cruz, California
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