Warning: This post is primarily about arcane legal distinctions and standards that will (or should) be applied to what’s going on in San Francisco. If that’s not your pint of plain, you may want to ignore this post. Yesterday I dipped my toe in the mash tun that is the city of San Francisco’s proposed “Alcohol Mitigation Fee Ordinance” (AMFO). The reason they’re characterizing it as a “fee” instead of a “tax” has to do with politics. A fee doesn’t require a two-thirds vote like a tax, just a simple majority.
Another odd detail that’s missing is a requirement for this type of fee is that a Nexus Study be done, and the proposed ordinance does indeed make reference to it on Page 3, where they claim it’s on file with the Clerk of the Board of Supervisors but leave a blank space for the file number. The reason it’s left blank is because there is no completed Nexus Study, as required. The proponents of the ordinance claim it will be completed in a week, but then why didn’t they wait until it was done before introducing the fee ordinance? If that’s a requirement, it seems they’ve jumped the gun, and this will give opponents less time to review the Nexus Study, which doesn’t seem at all fair.
There’s also no mention in the language exactly how they will collect from companies who do business in San Francisco but have no offices in the city, and thus are outside the city’s jurisdiction?
The earlier draft version of the AMFO included the language “ethanol ounce.” While nobody was sure how that was being designed, it’s now moot because the final document changed the language at the 11h hour to “ounce of alcohol” which is still rather vague and subject to a variety of interpretations as to how it will be applied. If I had to guess, I’d say that it’s possible that the strong spirits lobby got that change made since it would impact them the most by reducing their proportional taxes while beer would get hit the hardest. Curiously, all of the news reports I’ve seen, such as the one from KTVU Channel 2, a typical example, continues to use the phrase “ounce of ethanol” suggesting the mainstream media is working off of earlier versions or not looking at the source document at all. In either event, it’s not exactly stellar reporting and gives the public who reads that the wrong impression of what the AMFO will actually be doing.
But the biggest hurdle is one that’s been in place since 1997, when the California Supreme Court decided the case of Sinclair Paint Co. v. State Board of Equalization, et al. In that seminal case, the state tried to impose a fee on paint companies for potential harm caused by lead paint. Here’s a summary, from the Pillsbury Tax Page: “The Supreme Court held that case law clearly indicates that the police power is broad enough to include mandatory remedial measures to mitigate the past, present, or future adverse impact of the fee payer’s operations, at least where, as here, the measure requires a causal connection or nexus between the product and its adverse effects.” [my emphasis.] What that means is that a “fee” of this type in order to be constitutional and not need a two-thirds majority like any other tax (in other words to keep its “fee status”) it must be proven to have a direct link to the harm being caused by the product being taxed … uh, excuse me, having a fee imposed on it.
In their conclusion, Pillsbury characterizes these fees as camouflaged taxes.
The potential impact of Sinclair is tremendous since it is completely dependent upon the Legislature’s propensity to camouflage taxes as fees. Virtually every industry can be found to place some type of burden on society and now the Court has only limited the Legislature’s ability to impose fees on those industries within the bounds of its inventiveness. It is difficult, if not impossible, to reconcile Sinclair with the state of the law existing prior thereto.
And for the past thirteen years that’s been the standard and remains the controlling case. That means that the AMFO has to “prove” a direct link from the alcohol and the harm they claim is placing such an onerous burden on city resources. In the first two pages of the AMFO, they cite several studies they believe show such a link. But they’re wrong. For every study cited, I could produce ten that says the opposite, including studies that show that the moderate consumption of alcohol makes a person healthier than abstaining. To me, that suggests that trying to keep people from drinking is reckless endangerment or at least is putting the health of every adult who drinks moderately and responsibly at risk. And some of the studies mentioned aren’t even cited, meaning there’s no way to even confirm they say what the AMFO says they do. To say that their “proof” is shoddy is an understatement.
But, as usual, that doesn’t stop Bruce Lee Livingston, executive director of Marin Institute, from trotting out his favorite bullshit line, modified for the specific occasion. “It’s time for Big Alcohol, including wholesalers, to pay its fair share. A local alcohol charge for harm fee is long overdue.” I’m so tired of having to address this each and every time they give voice to this lie. As I’ve said many, many times, no other product save tobacco pays more taxes than alcohol already. To say that there’s some “fair” amount that alcohol companies should be paying is utter nonsense. There’s no amount high enough that would actually satisfy the Marin Institute, all they want to do in reality is put all alcohol companies out of business, the economy and a majority of people’s wishes be damned.