Taxing “Alcoholic Beverages” in California

In my last post, I wrote that arguments in favor of raising so-called “sin taxes” on all types of liquors, including beer and wine, sparkling cider and wine, and distilled spirits, are largely founded on prohibition-era and earlier thinking about alcohol and its presumably undesirable effects on society. In this post, I will analyze California’s “alcoholic beverage” tax structure to show just how much in taxes currently paid on alcohol in California already goes to programs and other efforts in the state to combat “alcohol-related illness and injury.”

As the chart below shows, California already imposes sizeable taxes on beer and wine, sparkiling cider and wine, and distilled spirits at expontentially increasing rates. This likely reflects a public policy of discouraging consumption of stronger intoxicating liquors,  presumably because of the increased harm to society caused by such liquors, even though “distilled spirits” are available for sale throughout California in the same quanities as “beers and wines” and “sparkiling ciders and wines.”

* BEVERAGE TYPE	* TAX RATE               PER GALLON	* CAL. REVENUE and TAXATION CODE §§
Distilled Spirits (100 proof or less)	$ 3.30	§§ 32201 and 32220
Distilled Spirits (over 100 proof)	$ 6.60
Beer	$ 0.20	§§ 32151 and 32220
Wine	$ 0.20
Sparkling hard cider	$ 0.20
Champagne and sparkling wine	$ 0.30

* California State Board of Equalization, Alcoholic Beverage Tax, Special Taxes: Tax Facts, Aug. 2010, available at www.boe.ca.gov/pdf/pub92.pdf.

A tremendous amount of all types of alcohol is sold in California every year, generating large sums of money for many state and local programs in California seeking to combat the effects of alcohol on society. Indeed, California’s “alcohol beverage tax” provided over $226 million in general fund revenues for the state in 2011 alone. And the California State Controller projects revenues from this tax source will increase by 4% in fiscal year 2012-2013, generating an additional $9 million for state coffers. See John Chiang, Statement of General Fund Cash Receipts and Disbursements, Office of the California State Controller, Feb. 2012, A2, available at www.sco.ca.gov /Files-ARD/CASH/fy1112 _feb.pdf.

Further, the State of California in 2011 appropriated well over $1 billion for state health and human services including funding for the California Department of Alcohol and Drug Programs which “is responsible for administering prevention, treatment, and recovery services for alcohol and drug abuse . . . .” See http://www.adp.ca.gov/. The state also appropriated over $135 million in the same year to local departments of alcohol and drug programs to provide even more assistance to communities seeking to combat the effects of alcohol on society in California.

Nevertheless, Assembly Member Beall in his AB 1694 of 2010 insists that costs to society associated with alcohol-related problems are high enough to justify increased taxes on beer and wine, sparkling cider and wine, and distilled spirits across the board, noting among other things: (1) The use of alcohol is a factor in the majority of child and spousal abuse cases; (2) Eight out of every ten felons sent to state prisons are alcohol abusers; and (3) The use of alcohol is closely associated with mental illness and contributes enormously to the cost of treating the mentally ill.”

But a fundamental flaw underpinning Assembly Member Beall’s justifications for his bill shows just how much prohibition-era and earlier thinking about alcohol still affects the debate about alcohol regulation in the United States. What the bill overlooks is that “costs to society” from myriad sources, many less accepted and less valued than alcohol, contribute to – among other problems blamed on alcohol – child and spousal abuse, sending felons to state prisons, and serious mental illness in California. By singling out alcohol consumers as especially deserving of paying more taxes towards the public cost of these broad based social problems is one more example of our attempt to demonize alcohol and, ultimately, those who consume it.