Idaho beer, wine tax hike hearing draws crowd

 BOISE, Idaho—Melanie Krause, who started Cinder Winery in 2006 in Idaho's capital and now sells five varieties, told lawmakers Monday that a plan to triple the tax on wine to help pay for state substance abuse treatment could put her out of business.

The Common Interest, a government reform group pushing the bill, has won support from cities, law enforcement and alcohol and drug-treatment activists. The measure would raise the wine tax to $1.56 a gallon from 45 cents, and the tax on beer to 52 cents a gallon from 15 cents.

Krause told the House Revenue and Taxation Committee that the increase would cost her startup winery about $7,000 over the next five years as she tries to wring a profit from her cabernet sauvignon, syrah and voignier grapes.

Because Idaho's growing season is shorter than rival states like California, Krause said wines produced here already are more expensive.

"This bill is going to make it very difficult for us to continue to exist," she said.

Krause was among more than 50 people who testified on the proposed increase. So many sought to speak that the committee scheduled a second day of hearings for Tuesday.

Keith Allred, head of The Common Interest, testified that responsible drinkers will spend just pennies more per pint or glass, all for worthwhile programs.

"It's pocket change," Allred said. "The 20 percent of people who consume 80 percent (of beer and wine) are more prone to abuse it and will pay more, and they should."

Idaho's beer tax is now the 37th highest in the nation and its wine tax 34th. If the bill passes, the beer tax would be the ninth highest and the wine tax the seventh. Someone who drinks three beers a week currently pays $2.18 a year for the tax, which under the bill would go to $7.64. Drinkers of three weekly glasses of wine would pay $9.52 a year, up from $2.81.

"I'm shocked that everybody thinks this is a large increase," said Mike Larkin, of Cambridge, who favors the plan.

But Roger Batt, the Idaho Grape Growers and Wine Producers lobbyist, said the measure would hurt Idaho's nascent grape and wine industry.

"This is not the economic climate when Idaho should be generating revenue from pet projects," said Batt, who is among the beer and wine, restaurant, retail and convenience store representatives who are against the increase.

The bill also would no longer tax beer and wine based on volume, instead charging 7.8 percent of the wholesale price of beer and 4.5 percent of wine, to keep pace with inflation.

That modification has caused a rift even among members of Allred's group.

Hawk Stone argued it would unfairly shift the burden of substance abuse treatment to people who choose more expensive beverages of the kind that Idaho wineries and small brewpubs are aiming to produce.

"I would support the bill, if it were rewritten," Stone told the panel, adding he believes drinkers of more expensive beers are more likely to drink responsibly. "It's too expensive to get drunk on a $5 pint of beer."

Supporters say the measure is a reasonable way of requiring drinkers to pay for a greater share of substance abuse treatment. The beer tax hasn't been changed since 1961 and the wine tax remains at 1971 levels.

They pointed out that Idaho's budget crisis is already having an effect on such programs: Gov. C.L. "Butch" Otter has proposed cutting 10 percent from state substance-abuse funding in fiscal year 2010, which starts July 1. Allred's bill would direct $14 million into a dedicated substance-abuse treatment fund, with the remaining $5 million going to the state's general fund.