CA's Decaying Alcohol Tax Meets Its Budgetary Hole

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What do we do when the money runs dry, and nothing else does?

California currently faces this question, torn between two stark realities: on the one hand, a crushing 22.5 billion dollar debt; on the other hand, a dizzying 75% increase in alcohol-related deaths since 2015. The answer is simple (though putting it into practice less so): raise the alcohol excise taxes in the state.

California’s problems are echoed throughout the country, and many states are exploring similar solutions. Lawmakers in New Mexico, Oregon, Massachusetts, and Mississippi have all introduced bills raising alcohol taxes this year. Yet all have been met with enormous pushback from the industry, and in some cases astonishing reversals from lawmakers. This puts California in a bind, but a bind it cannot afford ignore.

Alcohol excise taxes are collected at the time a product is bottled by the producer. They are typically set at a flat rate—say, $3.00 per gallon, or $0.05 per bottle. The problem with this strategy is that these flat rates do not rise as inflation rises. In a state like California, whose excise taxes haven’t risen since 1992, that means the value of the tax has degraded severely. Because of inflations steady march, the California excise tax is worth only 48 cents on the dollar compared to when it was originally put into law.

Meanwhile, alcohol-related deaths have skyrocketed. A JAMA report estimated the mortality rate increased 25% in one year between 2019 and 2020. Comparing Centers for Disease Control (CDC)’s 2015 estimates to California Department of Public Health’s 2021 figures, annual deaths increased from 11,026 to 19,335 – over 8000 more deaths, a 75% increase over six years.

This costs the state real money. CDC places the yearly costs to the California government from alcohol harm at $14.47 billion. Only 16% of that sum is earned back in taxes. And with the sheer quantity of alcohol production in this state, simply bringing the excise tax back up to its equivalent 1992 level would raise $4.6 billion over 10 years. To emphasize how small that increase really is compared to the revenue of industry and the money paid by consumers, a nickel-per-drink tax increase would raise nearly twice as much—$8.81 billion over 10 years.

Considering the nominal amount of this increase, and its potential to offset the current spiking death toll, these raises should be common sense policy. Yet the truth does not bear that out. Oregon’s attempted tax increase last year failed, although the same group is trying again. Mississippi’s vanished in committee. Massachusetts’ remains alive if still far from law, but as for New Mexico…

Facing the highest rates of alcohol-related harm in the country, New Mexico State Representative Joanne Ferrary proposed a 25-cent-per-drink hike. This was quickly watered down to 5 cents per drink, then 1 cent per drink. Then the tax increase—a single penny tax increase—was stripped out and instead general fund monies were earmarked for alcohol prevention. Then even that was vetoed by Gov. Michelle Lujan Grisham.

What, then is the way forward for California residents? When even stories of New Mexican youth in their early 20s dying of liver cirrhosis cannot sway the Governor in the face of the favors she feels she owes the industry? The only fallback in these cases is… you.

Or more broadly, all of you. Alcohol Justice has written a letter strongly advising the Governor and the members of the Budget Committee to adopt an alcohol tax increase. If you are a California resident, we ask that you join Alcohol Justice and its allies in asking for this long-overdue, common-sense, and effective resetting of the alcohol excise tax.

No matter how strong the alcohol industry, no matter how much money it pours into lobbying in Sacramento, and no matter what ties the Governor may have based on his former life as a wineseller and bar owner, the voice of the people can come first if its heard. Please click through to the action alert below and make Gov. Newsom and the members of the budget committees know this is important. It’s been 30 years and countless deaths, and we have never needed it more than we do today.

TAKE ACTION to tell Gov. Newsom and the budgetary committees to bring back the value of our alcohol taxes.

READ MORE about alcohol taxes and Charge for Harm strategies.