Quietly Congress is gearing up to hike taxes on wine. They are proposing around $0.50/bottle. That seems small, but the problem is that wineries pay this tax when they ship out of their warehouses to distributors’ warehouses. Therefore the little $0.50 becomes $1.00 on the shelf (accounting for distributor margin and retailer margin). That might not seem like much but in a difficult economic environment that could send many wines above their perceived price treshold ($9.99 becomes $10.99, $14.99 becomes $15.99). With that in mind it is likely that many producers will eat most of the tax hike themselves thus reducing their profit. What wrong with reducing profit? Well, less profit means less investment, less employment, less creativity and in the long run more company failure and increased consolidation. I don’t think this is good, do you?
I have two ideas to help out the wineries with this tax increase (which is likely and in some way is meant for a good cause i.e. financing a national healthdare system): 1) truly liberalize the wine business, go away with the three tier system 2) allow wineries to pay federal taxes 90 days after the wine as left their warehouse to mitigate the impact on our cash flow.
I doubt any of those ideas would fly…
Nicolas
June 5th, 2009 at 1:26 pm
major bummer…my last bit of sanity in these tough times - my wine is now subject to it too. MAJOR MAJOR bummer for the wineries. Sigh. We’ll get through it.