New York Governor David Paterson has unveiled his proposal to fix his state’s budget mess, and it includes taxes on everything from soda and beer to furs and yachts. Like California and most states, New York (the third largest in population) is facing massive revenue deficits, the likes of which have never been seen before. So it should come as no surprise that several of Governor Paterson’s 88 revenue-generating ideas to fill New York’s $15.4 billion shortfall are alcohol tax hikes. Taking a page from California Governor Arnold Schwarzenegger’s recent proposal to increase alcohol taxes makes sense, especially considering that the last tax hike in both states was 1991.
Most encouraging is the governor’s proposal to increase “the tax on flavored malt beverages to levels consistent with the taxes imposed on other alcoholic beverages.” Given that alcopops (deceptively named flavored malt beverages by industry) are gateway drugs for underage drinking, and that youth are especially sensitive to price, we can think of no better win-win solution. For too long, these sweet, soda-like alcoholic beverages have been taxed at the lower beer rate, keeping them cheap and available.
The governor also wants to see wine and beer taxes go up. With all the lobbying power of the wine industry in California, it’s hard to find a state with a lower wine tax, but at 19 cents per gallon, New York’s wine tax rate is second lowest in the nation. (California ranks third lowest, at 20 cents per gallon, while Louisiana scrapes the bottom of the wine barrel at a mere 11 cents per gallon.)
To make matters worse, New York’s neighboring states have significantly higher wine taxes rates. For example, Connecticut taxes wine at 60 cents per gallon, while New Jersey is even higher at 70 cents per gallon. Therefore, Governor Paterson wants to increase the taxes on wine and beer to levels that would be “approximately the average of surrounding states.” The tax on wine would increase from 18.9 cents per gallon to 51 cents per gallon, and the beer tax would increase from 11 cents per gallon to 24 cents per gallon.
The estimated additional revenue from the wine and beer increase would be $63 million annually, while the governor estimates the alcopops tax increase would generate $15 million in the 2009-2010 fiscal year, and $18 million in 2010-2011.
Perhaps to soften the blow to the wine industry, as well as ensure more tax revenue, the governor’s proposal also would expand the sale of wine into the state’s 19,000 grocery stores. Currently, wine can only be sold through New York’s 2,400 liquor stores. This idea, which has long been battled over in New York, has received mixed reactions.
But even with the looming budget deficit, nothing is certain. As the Wine Spectator notes, “the fight over the entire budget will be contentious.” No doubt, but raising alcohol taxes in a state that is long overdue—and in such dire financial straights—makes good economic sense, while also being positive for public health.
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