Pennsylvania might improve its dreadful drinks laws—a little

Source: Cartoon ©2012 Signe Wilkinson/Philadelphia Daily News. 

If Rep. Jesse Topper has his way, Pennsylvania’s legislature will roll back its infamous stealth tax on drinks. Topper, a Republican representing the south-central Bedford, Franklin, and Mercer counties, has introduced H.R. 2263, which would repeal the “flexible pricing” authority given to the Pennsylvania Liquor Control Board in 2016.

Why is this good news? Well, the cheerfully named provision had the dreadful effect of enabling the state liquor officials to raise prices as they saw fit. The PLCB has a monopoly on the sale of spirits and a near monopoly on wine sales, so it can set prices without fear of price competition. And with the state legislature demanding the PCLB give it big chunks of revenue each year to fund government employees’ pensions and the like, the problem is obvious: flexible pricing is a stealth tax. Bureaucrats raise revenues for general government spending by elevating mark-ups paid by drinks consumers, sans legislative enactment. It is literally taxation without representation.

As my colleague Jarrett Dieterle has observed, “Retail liquor markups in control states usually are set as a percentage of the wholesale price of the liquor in question.” Topper’s bill proposes returning to Pennsylvania’s old fixed pricing scheme, which fixed the “mark-up” of a bottle of hooch or plonk at 31 percent. (To be clear, Keystone State consumers do not pay a price that is merely the wholesale price plus a 31 percent mark-up. Oh, no. They pay a price that also includes a 24 percent tax and a more than $1 a bottle fee. And some counties levy additional taxes.)

The old mark-up system, certainly, is not ideal—but it is less bad. Re-enstating it means politicians will find it a little harder to hide the true cost of government by keeping taxes artificially low and covering the difference by sticking drinks consumers with the bill.

And who knows, if the legislature can find the sense and courage to enact Topper’s bill maybe it one day also will have the gumption to abolish other bad drinks policies, like the law that forbids anyone from buying more than four bottles of wine at one retail shop per visit. And the rules that limit the sale of spirits to dreary government-run shops. And the regulations that force consumers to make consumers go to distributors instead of groceries for many beer purchases. And…

Kevin R. Kosar is the vice president of policy at the R Street Institute and the author of Whiskey: A Global History and Moonshine: A Global History. He is the editor and founder of AlcoholReviews.com and a contributor to The American Spectator’s Great American Saloon Series.

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My mouth, my choice: Raise a glass to Prohibition Repeal Day

Kevin R. Kosar writes: “Plenty of hooey comes from the mouths of elected officials. Arguably, the prize for the nuttiest statement of all might go to the late Sen. Morris Sheppard, D-Texas. In 1930, he haughtily declared, “There’s as much chance of repealing the 18th Amendment as there is for a hummingbird to fly to Mars with the Washington Monument tied to its tail.” Sheppard, who spent three decades in Congress, was an anything but an impartial observer. The Texas Democrat had sponsored the constitutional amendment to ban drink and fought successfully for the Volstead Act and other anti-hooch laws. He was often called the father of prohibition, although in truth, this ugly progeny had many parents. Nativists, feminists, evangelicals, captains of industry, and paternalistic progressives joined to form a crazy quilt coalition against drink….” Read more at the Washington Examiner.

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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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The Strange War on Alcohol Advertising

Carrie Nation, the Hatchet-Wielding Temperance Warrior.

Earlier this year, there began a drum beat to ban drinks advertising. There was the Washington Post, which ran an article titled, “For women, heavy drinking has been normalized. That’s dangerous.” To ensure readers were sufficiently panicked, they included “Nine charts that show how white women are drinking themselves to death.” The authors fingered alcohol advertising and even an Amy Schumer movie.

The ivory tower, eager to help, also chimed in. “It is a looming health crisis,” declared one academic. Addiction journal, an always cheerful read, issued a “call for governments around the world” to pass laws banning alcohol advertising. “Governments are responsible for the health of their citizens,” admonished Prof. Thomas Babor, who edited the issue and long has demonized drink. To this end, public health agencies should be empowered to enforce the ban and punish anyone who violates it.

The Federal Trade Commission, for its part, frets, “These days, advertising is almost everywhere we go — on television, in the bus, on the street, and on the Internet. Alcohol advertising is no exception. And, as is the case with most advertising, alcohol advertising makes the product look great!”

What is all so bizarre is that the data on alcohol consumption paint a very different picture of America and drink. A new Gallup survey reports about six out of ten Americans today consume alcohol occasionally, which is about the same level as it always has been.

 But what about alcohol misuse, you may wonder? Well, per capita alcohol consumption is down from 10 liters to 8 liters per year since 1980, a 20% drop. Chronic liver diseases, which alcoholics can get, is down from 15.1 individuals per 100,000 to 10.4 per 100,000 during that same period. Drunk driving also is trending downward.

But what about the children, you may ask? Well, underage drinking by high schoolers has declined over the last decade. So too is binge drinking by under-age persons. The Centers for Disease Control reports: “During 1991–2007, the prevalence of current drinking among high school students declined significantly, from 50.8% (1991) to 44.7% (2007), and then significantly declined to 32.8% in 2015. The prevalence of binge drinking increased from 31.3% in 1991 to 31.5% in 1999, and then significantly declined to 17.7% in 2015.”

All of which makes the thesis — that alcohol advertising is a peril that demands new laws and new governmental enforcers — very strange.

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 essay previously appeared at the American Spectator.

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