Proposed new fee on wine will crush the local economy

California's increasingly heavy tax burden may soon get heavier as the Legislature considers penalizing California's wineries and their employees with punitive new fees. This new assault will increase prices, curtail consumer spending and eliminate thousands of jobs just as residents of recession-battered California are struggling to absorb the highest income and sales tax rates in the nation.

Assembly Bill 1019 (Beall) would impose a wine excise fee by 1,280% while Senate Bill 558 (DeSaulnier) would impose a wine fee of up to 640%. AB 1019's fee, euphemistically referred to as a "dime-a-drink", would devastate the wine industry resulting in the loss of more than 10,000 jobs. This comes on the heels of an unsuccessful attempt earlier this year to increase the excise tax on wine, beer and spirits.

The wine industry is one of the key drivers of our local and state economy and winegrape growers represent the single largest agricultural commodity in Amador County. Of the 2,800 wineries in California, more than 30 wineries are located here in Amador County. California wineries are mostly small, family-owned businesses currently struggling to be profitable in this crippling recession. In addition to the winegrape farmers and winery owners, other Amador County businesses including restaurants, wine bars, hotels, inns, meeting facilities, suppliers, trucking companies, manufacturers and their employees all rely on a viable wine industry and generate an additional $35 million in economic activity in non-wine expenditures. The ripple effect of a tax increase or new fee on wine would punish these businesses as well, forcing many to cut costs and lay-off long-time employees.

Worst of all, this effort to impose a new fee on wine simply ignores the fact that the California wine industry is already paying its fair share. Here in Amador County, area wineries generate $60 million in annual wine sales including $10 million in tasting room sales. Each year, the California wine industry pays more than $3 billion in state and local taxes while providing more than 309,000 jobs paying more than $10 billion in wages to California employees.

And, it doesn't end there, the California wine industry generates more than $2 billion in annual tourism revenues. All told, the state's wine industry creates more than $52 billion in annual economic activity for California's economy. Why punish this industry for its success in creating jobs and stimulating the economy? Wine is one of California's signature industries which should be supported and promoted by our state, not selectively targeted for new fees.

A 640% tax increase equates to an additional $217.60 tax per ton of grapes and puts the state's farmers at a severe competitive disadvantage to subsidized foreign wines. If this fee proposal was implemented, Amador County grape growers would have to charge a higher price which would force me and other local winemakers to consider purchasing less expensive grapes from other areas of the state to make ends meet.

For wineries, the financial impact would be equally as devastating. Over 60% of all California wine sold is priced at $6.99 or less. Over 80% of California wine is sold for under $9.99 a bottle. Wineries would be forced to either absorb the tax increase which eliminates their profit margins by paying an additional $0.50 for each 750 ml bottle under SB 558 or a $1.00 per bottle under AB 1019. Either way, these two legislative bills are job killers!

Moreover, this extraordinary fee proposal would establish a dangerous precedent for other states to follow, thereby not only affecting the wine industry's contribution to this state's economy but to the entire U.S. economy. It is simple, if California, where 90% of our nation's wine is produced, was to establish a new fee on wine, other states would surely follow this misguided policy and severely damage our industry.

The California wine industry supports broad-based revenue measures to help solve the budget crisis - both those going before voters in the May 19th special election and those implemented on April 1. The April 1 tax increases will generate more than $75 million in additional revenue for the state from the wine industry and its consumers.

Now more than ever, our state's leaders need to protect and preserve California jobs rather than force the business owners who provide those jobs to the edge of bankruptcy with punitive fees. Selectively penalizing the wine industry is simply unfair. It ignores the financial contributions our industry already provides, it would depress wine sales, it would eliminate thousands of jobs and it would devastate local economies throughout the state.

For more information or to inform your State Legislator of your opposition to AB 1019 and SB 558, visit www.sinkthedrinktax.com.