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HomeMy WebLinkAboutMINUTES - 08161988 - I.O.13 TO. BOARD OF SUPERVISORS FROM: INTERNAL OPERATIONS COMMITTEE Contra Costa DATE: AUGUST 15, 1988 .@ C;o^ SUBJECT: INCREASE IN ALCOHOLIC BEVERAGE EXCISE TAXES ("SIN TAXES") SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION: 1 . Direct the County Administrator to include in the Board' s 1989 Legislative Program an increase in the alcoholic beverage excise taxes. 2 . Request the Health Services Director, through the alcohol program staff, to establish a network of concerned individuals and agencies who can be brought together in an effort to draft legislation which might be introduced in 1989 . 3 . Request the County Administrator to consult with the County' s lobbyist and legislative delegation regarding the feasibility of meeting with representatives of the beer, wine and distilled spirits industries with a view toward reaching a concensus ofl legislation which could be introduced in 1989 which all parties. could support and report his conclusions and recommendations to our Committee. 4. Request the Health Services Director in consultation with the Alcoholism Advisory Board and Drug Abuse Board to determine and outline those steps that would be necessary to place an initiative on the ballot in 1990 proposing a substantial increase in the alcoholic beverage excise tax and report their recommendations to our Committee. 5 . Request the Health Services Director, in consultation with the Alcoholism Advisory Board and Drug Abuse Board, to ' prepare a public education program addressing the issue of the abuse of alcohol and other drugs and report their recommendations to our Committee. One element of this program should consider the feasibility of a substantial surcharge on the advertising of alcoholic beverages on radio and television as a means of financing a public education program or a requirement that all such ads include a reminder of the need for responsible use of alcoholic beverages. CONTINUED ON ATTACHMENT: _ YES SIGNATURE: - RECOMMENDATION F COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE HER70- SIGNATURE(S): Sunne W. McPeak Tom Torlakson ACTION OF BOARD ON Auaust_ 16, 1988 APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT .THIS IS A TRUE X UNANIMOUS (ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT; . ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ell cc: CAO Drug Abuse Bd. ATTESTED HS Director Alcohol Prog.Chief PHIL BIA CHELOR, CLERK OF THE BOARD OF Sheriff-Coroner Drug Prog. Chief Dist. Attorney SUPERVISORS AND COUNTY ADMINISTRATOR County Counsel Alcoholism Adv.Bd. BY ,DEPUTY M382/7-83 -2- BACKGROUND: On June 7, 1988 the Board of Supervisors referred to our Committee the feasibility of , increasing the excise tax on alcoholic beverages with the proceeds from the increased tax to be dedicated to public education . programs on the problems of substance abuse, and public health and alcohol treatment and rehabilitation programs. Our Committee met August 15, 1988 with Chuck Deutschman, Drug Program Chief in the Health Services Department. We also reviewed the attached report from the County Administrator' s Office indicating that the excise tax on alcoholic beverages has been increased little over the past 50 years and not at all since 1967. It was noted that of the 35 states that impose an excise tax on alcoholic beverages, California ranks third lowest in the level of tax. Doubling the current excise tax would generate $200 million a year which could be dedicated to education, prevention and treatment programs for those conditions which are brought about by an excessive use of alcohol. While legislation to increase the tax does not appear to be feasible our Committee agrees that an effort should be made to get legislation passed in 1989 . Failing that, an initiative should be pursued in 1990 to allow the public to determine whether the tax on alcoholic beverages should be increased. We believe that the use of a grassroots effort, including high school and college students and such groups as MADD, SADD, law ' enforcement groups and health advocates could be successful in an initiative effort if legislation is not successful. As a result of our deep concern about the need to find ways to prevent the excessive use of alcoholic beverages, educate the public to the problems created by such excessive use and finance the treatment programs which are a county responsibility, we have agreed to make the above recommendations. OFFICE OF COUNTY ADMINISTRATOR CONTRA COSTA COUNTY Administration Building Martinez, California Supervisor Sunne McPeak Supervisor Tom Torlakson To: INTERNAL OPERATIONS Date: August 8 , 1988 From: Claude L. Van Marter �! ject: Feasibility of Increasing Assistant Administrator, Sub "Sin Taxes" On June 7 , 1988 , the Board of Supervisors referred to your Committee the question of whether it is feasible to increase the "sin taxes" and dedicate the increased revenue to programs designed to prevent or treat the ailments resulting from i excessive or inappropriate use of the products being taxed. This ` type of "user tax" makes the user of the produce pay for at least a portion of cost of medical and other care which may be directly related to the use of the product. In terms of a definition of "sin tax" for purposes of this report, we will limit ourselves to the tax on tobacco products and the excise tax on beer, wine and distilled spirits. We are not going to give much attention at this point to the tax on tobacco products because an initiative (Proposition 99) has qualified for the ballot in November. If approved by the voters, Proposition 99 would increase the excise tax on cigarettes from 10 cents per pack to 35 cents per pack, with the. increased tax being dedicated to a variety of health and public health programs designed to address the medical problems generally associated with smoking. The other major area of "sin tax" is the excise tax on alcoholic beverages. California imposes. an excise tax on beer, on wine and on distilled spirits (hard liquor) . We will describe the history of each of these taxes and then provide some recommendations on what actions your Committee may wish to take. BEER - Prohibition was repealed by the enactment of the 21st Amendment to the U. S. Constitution on December 15, 1933. The California Legislature moved quickly to impose an excise tax on beer effective July 1, 1935. The tax initially was 2 cents per gallon, or 62 cents per barrel. The tax remained at this level until July 1, 1959 when the tax was doubled to 4 cents per gallon, or $1.24 per barrel. Therefore, the initial 2 cents per gallon was left in place for 24 years, from 1935 to 1959. The tax has now been at the 4 cents per gallon level for 29 years without any change. (The current tax is provided .for in Revenue and Taxation Code Section 32151) . Interna_ --orations August Page DISTILLED SPIRITS - The Legislature likewise imposed an excise' tax or., f _ sp._lled spirits effective July 1, 1935. The excise tax was fi re. 80 cents per gallon for distilled spirits of proof strengt : ( 50% alcohol by volume) or less and $1 . 60 per gallon for all dist_=led spirits in excess of proof strength. The tax was increased effective July 1, 1955 to $1 . 50 per gallon for proof strength or less and $3 . 00 per gallon in excess of proof strength. The tax was agai:: increased effective August 16 , 1967 to $2 . 00 per gallon for proof strength or less and $4. 00 per, gallon in excess c_ proof strength. The tax, in summary, has been as follows: 1935 - 1955 80 cents per gallon 195- - 1967 $1. 50 per gallon 1967 - to date $2. 00 per gallon Therefore, while there have been some substantial increases in the tax over the years, it has been 21 years since the tax has been increased. (The current tax is provided for in Revenue & Taxation. Code Section 32201 ) . " WINE Describing the tax on wine is somewhat more complex because the' tax is imposed differently on four categories of wine: 1. Wine with alcohol content not more than 14% 2. Wine with alcohol content more than 14% 3 . Champagne and sparkling wines 4 . Sparkling hard cider Initially in 1935 the tax was imposed on only two categories: 2 cents per gallon for .-all wines, regardless of alcohol content 24 cents per gallon on champagne and sparkling wines In 1937, the tax on what was referred to as "natural dry wine" . .was actually reduced from 2 cents per gallon to l cent per gallon. The tax remained at 2 cents per gallon on all other wines. In 1953 , the distinction was first made between wines with less. than 14% alcohol and wines with more than 14% alcohol. The tax remained 1 cent per gallon on the former and 2 cents per gallon on the latter. For the first time, sparkling hard cider was defined as a separate category and taxed at 2 cents per gallon. Internal Operations August 8 , 1988 Page 3 In 1959 , the tax on champagne and sparkling wine was increased from 24 cents per gallon to 30 cents per gallon. Thus , if natural dry wine can be equated with wine with no more than 14% alcohol, the tax started at 2 cents per gallon was reduced to 1 cent per gallon in 1937 and has never been increased in the last 51 years. The tax on wine with more than 14% alcohol has been 2 cents per gallon since 1935 and has never been increased. The tax on champagne and sparkling wines which started out at 24 cents per gallon in 1935 was increased to 30 cents per gallon in 1959 where it has remained for 29 years. Sparkling hard cider was first defined as a separate category in 1953 . This tax, 2 cents per gallon, has not been increased in the 35 years since it was established. (The current tax is provided for in Revenue & Taxation Code Section 32151) . CONCLUSIONS: 1. Except for the 50 cents per gallon increase in the tax on distilled spirits in 1967, there has been no marked change in the excise tax on alcoholic beverages for nearly 30 years. 2 . There has been no change at all in these taxes since 1967 and in several cases (namely wine) there has been . no change in over 50 years . 3 . The tax on beer, on a volume of alcohol basis, is substantially higher than the tax on wine. If we assume most beer is 6% alcohol and most wine is 12% alcohol, the 4 cents per gallon tax on beer is 8 times as high as the same amount of alcohol in wine. 4 . There is no doubt a very good reason why the tax on wine has been kept at such a low level. Wine is a major product in California and the tax is undoubtedly kept low to keep California wines competitive. Internal Operations August 8, 1988 Page 4 RECOMMENDATIONS- The liquor lobby in Ca= _ = r: -:ia is well Financed and ' extraordinarily effective at keen-ng the tax on their products at a low level. An all-out assau_ on the liquor lobby is likely to ' be very expensive and of questionable success. If it were simple , to increase the tax on alcoholic beverages it would have been,, done one or more times in the -:ast 20y..�_ ears The Fact that such' an such has not been effective is a testament to thee,; effectiveness of the liquor in protecting its =nterests. ( 1 ) A dialogue might be undertaken with the liquor lobby and leading legislators to see What chance there is of pressing for a dedicated tax increase in 1989 . Dedicating., the proceeds of a tax increase to specific '' alcohol-related medical problems is probably less acceptable to the liquor lobby than a straight taxi increase for general revenue purposes. ( 2 ) If -such a dialogue indicates substantial resistance. to '' such a tax increase, then the only viable alternative ' would appear to be an initiative campaign similar to ' Proposition 99. This would also be expensive and would . require the dedication of substantial time and energy. , However, this may well be the only way such a tax ' increase stands any chance of being enacted. CLVM:clg cc: Mark Fincuane, Health Services. Director . Richard Rainey, Sheriff-Coroner Gary Yancey, District Attorney Stu McCullough., Mental.- Health Director I' IIS