Politics & Government

California wine makers lobby Congress

WASHINGTON — California winemakers this week are lobbying Congress in their own distinctive way, hoping to fend off farm spending cuts and potential tax increases.

On both fronts, they have key allies.

"They are worried about being taxed in a major way as part of a healthcare bill," Democratic Sen. Barbara Boxer said Wednesday morning, adding that "I don't think we ought to raise taxes on wine."

Neither do the other California lawmakers who trooped through Room H-144 of the U.S. Capitol. Speaking to executives from Modesto-based E&J Gallo Winery, Ceres-based Bronco Wine Co. and the San Jose-based J. Lohr Winery, among others, Republicans and Democrats alike rejected boosting wine excise taxes.

"It harms the industry, and it increases the price for the consumer," said Rep. George Radanovich, R-Mariposa.

Radanovich co-chairs the Congressional Wine Caucus, which now claims some 250 members. It's a strong, but not necessarily inviolable, base upon which the politically well-connected wine industry will rely when state and federal governments look for more money.

The Obama administration and congressional leaders are starting discussions about how to finance an ambitious health care reform package. The current federal excise tax that amounts to 21 cents on a conventional bottle of wine is drawing attention because it hasn't been raised since 1991.

"Higher taxes and prices would dampen alcohol consumption and lead to additional health-care and other cost savings to the federal government and to the economy generally," Center for Science in the Public Interest Executive Director Michael Jacobson told the Senate Finance Committee on Tuesday.

A longtime proponent of higher alcohol taxes, Jacobson said simply adjusting the alcohol tax for inflation could raise $5 billion annually.

"The tax rate on alcohol is well below the level that would account for the damage that drinking does to society, in particular through drunk driving," MIT economist Jon Gruber added in his own Senate Finance Committee testimony.

At the same time, Gruber stressed that "it is difficult to raise sufficient revenue" from so-called sin taxes on products like tobacco and alcohol. Health care packages are still being developed, so the funding sources remain uncertain.

In Sacramento, too, wine industry leaders fear California officials might turn to an alcohol tax hike as they seek to balance the state's precarious budget. Even though it's a state issue, Radanovich said the Congressional Wine Caucus could weigh in with letters and other expressions of opposition.

"You're going to put California at a disadvantage if you raise the excise taxes," said Rep. Devin Nunes, R-Visalia.

The Wine Institute, in its formal position statement, adds that "wine is one of California's signature industries that should be supported and promoted by our state, not selectively targeted."

The Californians are likewise resisting an Obama administration proposal to cut Market Access Program funding by 20 percent. The San Francisco-based Wine Institute, which organized this week's lobbying fly-in, has received $27 million from the program since January 2006 to help advertise and market wine exports.

Rep. Kevin McCarthy, R-Bakersfield, said Wednesday after meeting with the winemakers that the taxpayer assistance is needed to combat subsidized European wines. The Obama administration insists at least some of the $200 million a year now dedicated to the program could be better spent elsewhere.

"(The program's) economic impact is unclear and it does not serve a clear need," the White House Office of Management and Budget stated, adding that the Market Access Program "has often been singled out as an example of corporate welfare."

This week's industry lobbying trip, involving more than 40 winery executives and family members, was to have its social high water mark Wednesday night in an annual reception held in the Library of Congress's Great Hall. The vaulted marble hall decorated in the Italian Renaissance style rents for $35,000, plus the catering costs and roughly $7,000 in administrative charges; invitations to the wine reception are always coveted on Capitol Hill.

The Wine Institute's ongoing lobbying efforts continue after the winemakers go home, as the organization reported spending $347,000 for direct federal lobbying efforts last year.

"They'll have to be more proactive than ever before," McCarthy said.