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Alcohol Industry Loses Alcopop
Tax
Battle
in California |
Several states are facing the issue of whether alcopops, which include Mike’s Hard Lemonade, Smirnoff Ice, and Skyy Blue, should be taxed or otherwise treated as beer or hard liquor. Maine recently became the first state to tax these beverages at a higher rate than beer, and Utah Attorney General Mark Shurtleff has urged his state’s Alcoholic Beverage Control Commission to consider a similar measure. In Oregon, however, lobbyists for the alcohol industry won the passage of legislation to preserve the state’s lower tax rates for these sweet, fruity, alcoholic drinks popular with underage girls.
The battle hit California when the alcohol industry tried to sneak an alcopop tax bill through the legislature in the final days of the 2005 session. Assemblyman Greg Aghazarian (R- Stockton) employed the “gut and amend” tactic to change an unrelated bill into a gift for Big Alcohol. Not surprisingly, Aghazarian is the leading recipient of alcohol industry campaign contributions in the State Assembly.
Under California’s Alcohol Beverage Control Act, these beverages are classified as distilled spirits, but for years the industry has marketed them as beer, taking advantage of the lower tax rate and the 35,000 additional retail outlets that are licensed to sell beer but not liquor. When California’s Attorney General Bill Lockyer suggested that he might investigate the issue, Aghazarian hijacked a bill and attempted to codify the industry’s tax break.
Although Aghazarian portrayed his bill as a minor technical change in the State’s alcoholic beverage classification, organizations including the Marin Institute pointed out the bill’s serious public health consequences and the need for an open public debate. Governor Schwarzenegger agreed and vetoed the bill in October.
It is no surprise that the industry wants to avoid public scrutiny of the issue. According to the American Medical Association, alcopops are marketed to underage drinkers and are quickly becoming the drink of choice among teenagers—especially teen girls. These products help perpetuate the nation’s underage drinking epidemic, a serious public health problem that costs the United States nearly $62 billion each year.
Because underage drinkers are responsive to price changes in alcoholic beverages, they consume less when prices rise. Taxing alcopops as spirits would increase prices and reduce youth access by limiting the retail outlets selling these products—both strategies for reducing underage drinking recommended to Congress by the National Academy of Sciences. Furthermore, the higher tax rate for distilled spirits would generate millions of dollars in revenue for cash-strapped state coffers. The annual revenue gain in California alone is estimated at $40.5 million.
California Governor Schwarzenegger’s veto of the industry’s bill is a temporary victory—the issue will arise again in the next legislative session. In California and other states, the issue of alcopop classification pits public health advocates against Big Alcohol, forcing policy makers to choose between protecting youth health and safety or industry profits.
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“Alcopops should be made harder for underage drinkers to buy—not easier”
-- Jim Mosher, Director, Center for the Study of Law and Enforcement Policy, Pacific Institute for Research and Evaluation.
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