Senate OKs Wine Industry Bid for 9-a-Gallon Tax Hike

Responding to an unusual request from the California wine industry, the Senate agreed Wednesday to boost the state wine tax by 9 cents a gallon in what would be the first such increase in more than 50 years.

Sponsored by the Wine Institute, the tax-hike legislation is designed to undercut a potential initiative on the 1990 ballot that could raise the tax on wine and other alcoholic beverages by 65 cents a gallon or more.

As testimony to the political influence of the wine industry in California, the tax on wine is now 1 cent a gallon. The last time it was changed was in 1937, when the tax rate was cut in half from 2 cents to a penny a gallon.

With little discussion, the Senate voted 27 to 5 to approve the wine industry’s tax hike bill. John De Luca, president of the Wine Institute, praised the Senate action as “an important first step.”

Ultimately, however, the bill may not fare so well. A spokesman for Gov. George Deukmejian said the Republican governor remains adamantly opposed to tax increases and will veto the bill if it is approved by the Assembly.

De Luca acknowledged that the wine makers proposed the tax increase in the hope of neutralizing an alcohol tax initiative being planned by Assemblyman Lloyd Connelly (D-Sacramento) and consumer groups.

“The most important reason was to help frame the issue and to provide us with a platform to talk about the economic contribution that we make” in providing jobs and paying other types of taxes, De Luca said.

Even at 10 cents a gallon, California’s wine tax would remain the lowest in the nation.

But in taking an active role in raising the tax increase now, the wine industry is attempting to avoid the fate of the tobacco industry. Last year, the voters approved Proposition 99, which increased the cigarette tax by 25 cents a pack. The tobacco industry spent more than $21 million in its unsuccessful effort to defeat the measure.

The Wine Institute has long been a prominent lobbying group in the state capital. It often provides wine for legislators’ fund-raising events and contributed more than $255,000 to legislators’ campaigns between 1985 and 1988.

De Luca downplayed the importance of the industry’s donations saying, “The influence of an industry such as the California wine industry clearly predates the present group of legislators and goes back to the fact that we’ve been part of this state since the very beginning.”