Nebraska Court Rules "Alcopops" Should be Taxed as Liquor

Flavored alcoholic beverages like Smirnoff Ice and Mike's Hard Lemonade -- dubbed "alcopops" by public health advocates -- should be taxed at the higher rate of distilled spirits rather than as beer, according to the Nebraska Supreme Court. The lawsuit, Project Extra Mile v. Nebraska Liquor Control Comm., was brought by Nebraska taxpayers and nonprofit groups battling underage drinking. Now the Nebraska legislature is considering a bill, LB824, that would undo the state Supreme Court's decision.

The Center for Media and Democracy (CMD) reported earier this year that Smirnoff, a division of $15 billion global liquor company Diageo, a prominent member of the American Legislative Exchange Council (ALEC), developed "alcopops" in 1999 to give distilled spirits greater access to the "youth market," according to the American Journal of Public Health.

These beverages are brewed as beer, but then the beer is drained off and replaced with "flavorings" containing distilled spirits and accounting for up to 99 percent of the alcohol in the reconstituted drink.

According to the Omaha World-Herald, taxing these beverages as distilled spirits rather than as beer in Nebraska will raise tax revenue to $3.75 per gallon compared with 31 cents per gallon for beer. Nebraska has missed an estimated $2 million a year in taxes because the drinks haven't been taxed at the proper level. Plaintiffs' attorney Vince Powers said, "The ruling means the out-of-state companies will have to start paying their fair share of taxes like everyone else."

Advocates say that the resulting higher prices will discourage some young people from buying the "alcopops." Diane Riibe, executive director of plaintiff Project Extra Mile, told the Omaha World-Herald on Saturday that she was "beyond ecstatic" about the ruling.

However, Riibe told CMD Wednesday in a call from the Nebraska capitol that a bill currently before the legislature "would essentially undo the Supreme Court decision and flip the law, so that the alcohol industry would essentially do what it had been doing all along illegally." Riibe's Twitter feed from the capitol is available here.

Riibe urged Nebraska residents to let their senator know how they feel about the issue. "This bill is not good for kids or taxpayers; it's good for the alcohol industry," she said.