California Raises Tax on Sweetened Alcoholic Drinks
California regulators voted on Tuesday to raise taxes on "alcopops," flavored alcoholic beverages some say are packaged to appeal to youth and contribute to underage drinking.
Maine has already made such a move, and other states are likely to follow, said Michael Scippa, advocacy director for The Marin Institute, a watchdog group.
The state Board of Equalization voted 3-2 to tax brands such as Mike's Hard Lemonade and Zima as distilled spirits rather than as beer, which has a lower tax rate.
The vote triggers a series of public hearings on how to implement Tuesday's decision. The classification change will increase the tax from 20 cents per gallon to $3.30 per gallon starting in July 2008, if the board can get the regulations in place by then.
Tax board chairwoman Betty Yee said she accepted the appeals from youth groups and an alcohol industry watchdog group that argued the beverages are flavored, packaged and marketed to appeal to young people.
"I think the overarching policy concern here was this is one element in dealing with underage drinking," Yee said in a telephone interview after the vote.
The packaging and marketing are designed to "make it look like you're drinking something hip," she said.
Scippa called the flavored beverages "cocktails on training wheels. They bridge the gap between soda pop and alcoholic drinks because they don't taste like alcohol."
Gary Galanis, a vice president of Diageo North America, one of the world's largest alcohol manufacturers and the maker of Smirnoff, said raising the tax on flavored drinks won't deter underage drinking.
"It's access. It's about how kids get alcohol in their hands. This will do nothing to address that issue," Galanis said after the vote. "Using an emotional issue to help drive a tax discussion is just wrong."
The higher tax rate would bring the state an estimated extra $30 million to $40 million a year if consumption remains the same, said tax board spokeswoman Anita Gore.
But Galanis said the higher cost will hurt retailers, restaurateurs and legal drinkers and cut consumption to the point there will be likely no net tax gain.
Tax board member Bill Leonard said that he opposed the decision because the drinks have roughly the same alcohol content as beer, and that there is no chemical difference between alcohol in distilled and malt beverages.
It makes no economic sense for manufacturers and distributors to target teenagers who can't legally buy the drinks, he said. If higher prices do deter them, he argued, they will simply switch to beer and wine.
Marc Sorini, lead attorney for six companies that produce about 75 percent of flavored malt beverages, said it is too soon to know whether the industry will sue to block the tax change.
The state Legislature also may be required to decide which agency has jurisdiction over the beverages, the tax board or the California Department of Alcoholic Beverage Control.
The state alcoholic beverage control board, like the federal government, classifies the drinks as beer.