Liquor Industry Pours In Millions to Fight Tax Hike
Alcoholic beverage giants like Miller, Jim Beam, Bacardi, Seagrams and Hiram Walker are pouring a lot more into California these days than cold beer, rum and bourbon. They are sending money. Big money.
Since January, the nation’s alcoholic beverage interests have been spending millions of dollars in the state to defeat what one industry leader calls the “single gravest threat to our industry since Prohibition.”
Fearful that California once again might be a bellwether for the nation, they are joining the native wine industry in battling a ballot initiative dubbed by its promoters the “nickel-a-drink” tax increase. Radio ads attacking the initiative have been running since mid-June.
The industry has invested more than $12 million in a unique strategy that industry officials hope will not only kill the initiative, but immunize them against future efforts by do-gooders to hike their taxes.
“In truth, this is the home of the California wine industry and the consequences to us of the (tax hike) are devastating because it will have repercussions around the country,” said John De Luca, president of the California Wine Institute. “We are deeply concerned about this virus spreading to other states.”
Jeff Becker, vice president for alcohol issues for the Washington-based Beer Institute, said his organization considers the initiative such a threat to its industry that it has departed from its normal policy of not involving itself in state issues.
“Things that happen in California have a way of creeping eastward,” Becker said. “It is very important to look at California as a model state. That’s why we have high visibility on this issue.”
The nickel-a-drink initiative--backed by an array of public interest, mental health and law enforcement groups--would impose a steep new tax on the industry for the first time in decades.
The tax on wine, a favorite son that last shouldered a tax increase in 1937, would jump from a penny a gallon to $1.29 a gallon. Beer, which has been taxed at 4 cents a gallon since 1959, would go to 57.5 cents a gallon. The tax on distilled spirits would jump from the $2 a gallon imposed in 1967 to $8.40 per gallon.
The estimated $700 million a year the new tax would raise would be designated for the prevention and treatment of alcohol and drug problems, emergency and trauma care services, child-abuse programs, law enforcement and programs to serve the health needs of children and pregnant women who are victims of alcoholism and drug abuse.
“The Legislature and the governor have shown themselves incapable of imposing taxes on big industries that are not paying their fair share and the only way to raise those taxes is to let the voters do it,” said Jim Schultz, policy analyst for Consumers Union, a supporter of the initiative. “The voters are quite willing to do it but they want some guarantees as to what (the revenues) will be used for.”
Acknowledging that polls show some public acceptance of tax increases for specific purposes, liquor interests have hired consultants and public relations experts to devise a complex and expensive strategy for defeating the nickel-a-drink measure. The strategy calls first for a well-financed campaign to oppose the initiative.
The next step, in an attempt to siphon votes away from that proposal, dictates that liquor interests seek voter approval of a rival measure--also on the November ballot. That measure would impose a much smaller tax hike, about $200 million a year, and leave to the discretion of the Legislature how the new revenue should be used. The route to the ballot for this measure was through the Legislature, which approved the lesser tax as a proposed constitutional amendment last week.
The final step in the strategy calls for a marriage of convenience with anti-tax groups who are sponsoring a ballot measure that would require a two-thirds vote of the people for any tax increase levied for a special purpose. If approved, that measure would apply to the nickel-a-drink initiative--and would kill the tax hike if it mustered less than 67% of the vote.
By the last reporting period in May, Taxpayers for Common Sense--the organization formed by the industry to fight the proposal--had collected $10.6 million to fight the higher tax measure. Most of the donations came from out of state.
They included $3.9 million from the Washington-based Beer Institute, $996,694 from Joseph E. Seagram & Sons Inc. of New York, $395,911 from Heublein Inc. of Connecticut, $290,868 from Detroit-based Hiram Walker Allied Vintners Inc., $181,108 from Bacardi Corp. and Bacardi Imports Inc. of Miami and Puerto Rico, $86,646 from Miller Brewing Co. of Milwaukee and $192,503 from Jim Beam Brands Co. of Illinois.
Although a large portion of the money will be saved for television advertising in the weeks before the election, the organization is spending $1 million immediately for a radio and newspaper advertising campaign.
De Luca, of the Wine Institute, said the initial advertising blitz is an attempt to introduce and frame the issue for the opinion makers of the state--editorial writers, television commentators and leaders of civic groups who will make recommendations on ballot issues to their organizations.
“The so-called ‘nickel-a-drink’ (description) is a catchy phrase and it’s very difficult to overcome,” he said.
While none of the industry organizations are formally endorsing the anti-tax initiative, De Luca conceded that individual companies have heavy financial involvement in that campaign.
“The significance for us is not only to defeat the (nickel-a-drink) initiative but to keep this from recurring every two years,” DeLuca said.
Of the $3.1 million already collected by Taxpayers Coalition for the Right to Vote, the campaign organization promoting the anti-tax initiative, approximately $1.5 million has come from alcoholic beverage interests and related industries. The cast of contributors is much the same as that in the campaign reports of the industry-supported Taxpayers for Common Sense.
For example, Coors Brewing Co. is contributing $50,000; Philip Morris USA, which has several beer subsidiaries, $60,000; American National Can, $300,000; Aluminum Co. of America, $100,000; Jim Beam Brands Co., $41,574; Hiram Walker & Sons Inc., $78,598; Joseph E. Seagram, $84,998; Bacardi Corp. and Bacardi Imports Inc., $36,640 and Heublein Inc., $53,582.
If approved by the voters in November, the anti-tax initiative would go into effect immediately. Because of that, it could defeat the nickel-a-drink proposal even if that measure passes but fails to win a two-thirds vote. Most experts say it would not affect the constitutional amendment supported by the liquor industry because revenue from that tax hike is not designated for specific purposes.
“What you have is an alliance of people that sort of worship at the altar of cutting taxes allied with extremely wealthy industries who are panicked they might be subject to democracy,” said Schultz.
Kris Vosburgh, executive director of the Howard Jarvis Taxpayer Assn., said the informal alliance between anti-tax groups and the alcoholic beverage industry on this one issue occurred not by design but happenstance.
“The fact that we would be supported by a group like that,” he said, “means what we are doing may fit their agenda but that’s not why we’re doing it.”
Vosburgh said his group is trying to address what it sees as a growing and dangerous trend toward raising special taxes to pay for specific programs, thus taking more and more budget-making flexibility away from the Legislature.
“We’re trying to strengthen the people’s right not to be taxed; otherwise groups will continue to be picked off one at a time to fund attractive sounding projects and programs with no thought to the overall picture and needs of the state,” he said.
