Assembly Puts Alcohol Industry’s Tax Hike on Ballot

Succumbing to intense lobbying from the liquor industry and leaders of both political parties, the Assembly reluctantly gave final legislative approval Thursday to placing a liquor tax increase before voters on the November ballot where it will compete with a more severe tax measure.

Even after Speaker Willie Brown (D-San Francisco) made a rare appeal for support from the Assembly floor, the lower chamber had to vote several times before supporters eked out the two-thirds majority a constitutional amendment needs to win passage.

Unlike the Senate, which had approved the measure by a comfortable margin, the final 54-18 Assembly vote was just enough to pass. A proposed constitutional amendment is not subject to action by Gov. George Deukmejian.

Opponents conceded that the narrow win was a victory for the liquor industry, whose motive in pushing the measure, they said, was to undermine the so-called “nickel-a-drink” initiative also on the ballot. It would impose a much stiffer tax on the industry and earmark the new revenue for specific programs.

“There was just ferocious lobbying from the Speaker, the Speaker’s office, the alcohol industry and the minority leader (La Habra Republican Ross Johnson). Some members told me they hadn’t been lobbied this hard in 10 years,” said Assemblyman Lloyd Connelly (D-Sacramento), an author of the “nickel-a-drink” proposal.

The proposed constitutional amendment approved Thursday would boost the per-gallon tax on table wine from 1 cent to 20 cents; on beer from 4 cents to 20 cents and on hard liquor from $2 to $3.30.

The measure placed on the ballot through voter signatures, on the other hand, would hike the per gallon tax to $1.29 on wine; 57 cents on beer and $8.40 on hard liquor. Backers of the initiative contend the new taxes would amount to a nickel on a five-ounce glass of table wine, a one-ounce shot of liquor and a can of beer. Industry officials maintain that the tax would be much higher when it reaches the consumer.

Led by Brown, supporters of the smaller tax increase urged the Assembly to overlook the possible motives of the liquor industry and consider only that the revenue raised by the proposal--unlike that raised by the initiative--could help ease budget shortages.

”. . . It is a good idea because all of the money will be available to address the issues of the $3.6-billion deficit which we are currently facing,” Brown said. State fiscal experts estimated that the increased tax would raise $84 million next year that could be used to address the deficit.

Brown said he preferred a higher tax hike but it was doubtful that Republicans would support any increase that did not have the industry’s endorsement. Ultimately only two Republicans--Assemblymen Charles Bader (R-Pomona) and Tom McClintock (R-Thousand Oaks)--opposed the measure.

Assemblyman Tom Hannigan (D-Fairfield), an Assembly leader who broke with Brown on the issue, argued that the industry’s motive should not be overlooked. He said the Legislature was being used to carry out a hidden strategy by an industry that is not interested in passing the tax measure but only in using it to draw votes away from the nickel-a-drink initiative.

“I don’t think we’re sitting here voting for a real tax increase,” he said.

Afterward, industry officials angrily insisted he was wrong.

“It’s in our enlightened self-interest to see (this) pass,” said John De Luca, president of the Wine Institute. “We are going to fight for it. We are going to put money behind it.”