Pennsylvania’s Stealth Tax On Drinks

Source: Library of Congress

Oh, Pennsylvania. You are wonderful in so many ways. Philadelphia has architectural marvels. Pittsburgh has the endlessly victorious Steelers and Penguins. The Allegheny and Poconos offer gorgeous vistas, and parks like Nockamixon are beatific places to hike and fish. And where else can one find ring bologna?

But your government, well, friends you have a problem. “No taxation without representation” is an age old creed in our nation. Yet, your government has a system that wantonly fleeces anyone who buys drinks.

Despite the 21st century’s arrival, the state maintains a system of government-run drinks shops. Last year, the much-despised Pennsylvania Liquor Control Board (PLCB) was granted flexible pricing by the state legislature. Previously, the PLCB bought drinks from producers at prices determined by a cockamamie formula that produced hefty profits. The new law empowered the government to haggle with drinks-makers for lower prices.

Beverage producers screamed at the prospect that a government monopoly would be empowered to demand low prices or threaten to cut off market access. But the whole package was sold as wonderful for consumers. “It continues to be our intention,” one the PLCB’s board member told legislators last November, “to not broadly increase retail prices on our best-selling items.”

Not one year later, the PLCB announced it was raising prices on 421 products. Its argument for doing so was blunt: legislators demanded PLCB pay $185 million into the state’s budget to cover rising public pension costs and other expenses.

The Philadelphia Inquirer tartly notes:

Though the flexible pricing was expected to generate more tax revenue, the state was also supposed to use its buying power to negotiate lower prices from wholesalers. The state did lower prices on a handful of items last year, but consumers have yet to see any major saving. Especially when compared to prices in New Jersey and Delaware. For example, a bottle of Kendall Jackson chardonnay costs 52 percent more in Pennsylvania (including the 6 percent sales tax) than at the Total Wine stores just over the state line in Delaware.

What a mess.

The state’s elected officials lack the courage to cut costs or raise taxes. Instead of presenting the public with the bill for the goods and services they consume, elected officials are hiding the true cost of government by shifting the burden to consumers of privately produced products. Do alcoholic beverages have anything to do with state pension costs? Nothing, of course.

And make no mistake, these mark-ups are a tax in disguise. Lawmakers delegated their constitutional authority to raise revenues to a bureaucracy, which then packages a tax increase as a mark-up on a consumer good. Which consumers and the state’s hospitality industry only may buy from the state monopoly. And, of course, citizens can’t protest the price increases by voting PLCB authorities out.

A little over two centuries ago, folks living in what became Pennsylvania raised cain when the new government in Washington, D.C. imposed an unprecedented tax on spirits. Perhaps a 21st century whiskey rebellion is overdue, which would demand elected officials end the drinks stealth tax by privatizing drinks sales. Beverages are a product like any other product (food, gas, guns, etc.) If consumers are to be taxed on them, then these taxes should be set by the people’s representatives.

Kevin R. Kosar is a senior fellow at R Street Institute and heads its alcohol policy reform program. He is the author of Moonshine: A Global History (2017) and Whiskey: A Global History (2010). This column previously appeared at the American Spectator.

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