Is this the end of Two Buck Chuck?
A proposal to raise the state tax on wine to a level more than six times higher to help close California's giant budget deficit would kill the $1.99 price for Charles Shaw wine, said Fred Franzia, who created the famous label sold by the Trader Joe's grocery chain.
Charles Shaw, of course, is the formal name for the California wines sold since 2002 that are now widely known by their nickname Two Buck Chuck.
The proposal by Gov. Arnold Schwarzenegger would raise the tax on wine to 29.6 cents for a 750-milliliter bottle from 4 cents.
"It's like shooting Charles Shaw in the eye," said Franzia, chief executive of Bronco Wine Co., which owns the brand. The profit margin is already so low we will have to raise the price."
Consumers have differing opinions on the excise tax, which is a levy on a specific good, often at the producer or supplier level and folded into the retail price, rather than a sales tax, which is paid directly by consumers.
But Franzia and the rest of California's wine industry are fighting furiously to derail the tax increase, which is part of Schwarzenegger's plan to close California's budget gap, estimated to reach $41.6 billion by the middle of next year.
With the state treasury expected to run short of cash to pay bills as soon as next month, Schwarzenegger and legislators from both parties are dickering over proposed solutions to the budget crisis. The wine industry's main trade organization and other business groups have suggested that any tax increases be broad-based and not single out specific industries.
"If there are going to be tax increases, revenue sources need to be spread as much as possible to minimize the economic harm," said Allan Zaremberg, president of the California Chamber of Commerce.
The governor wants to raise alcohol excise taxes by 5 cents a drink beginning Feb. 1. The revenue would be used to fund substance abuse and prevention-treatment programs. The state defines a drink as 1.5 ounces of distilled spirits, 12 ounces of beer or 5 ounces of wine.
This wine tax is one of many new taxes or increases proposed by the governor. Others include raising the state sales tax by 1.5 cents on the dollar and charging a 9.9% tax on each barrel of oil extracted in California. Schwarzenegger also would extend sales tax to veterinary care, car repair and other items now exempt from the levy.
