liquor

Liquor Privatization Would Edge Washington State Toward Freedom

by Michelle Minton on November 8, 2011 · 3 comments

in Features, Nanny State, Personal Liberty, Regulation

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Today voters in Washington State will finally have their say in whether or not to get the state out of the business of selling liquor. For months, advertisements on both the “yes” and the “no” side of the fight have filled the media. Many  observers lamented how much money has been spent on the issue. But in Washington State, this isn’t exactly new. For two years running, supporters and detractors of measures to sell off the state-run liquor store and liquor wholesaling business have shoveled millions of dollars into advertisements. This year’s attempt, Initiative 1183 has provoked a flood of cash like never before. Interested parties on both sides have given millions of dollars to sway voters.

The reasons are obvious: Wholesalers believe the measure could be the beginning of the end of the government propping up their business, and big box retailers hoping to earn a license to sell alcohol believe the passage of the bill will result in a significant increase in profit. But what is the best scenario for the consumer?

Washington, one of only 12 states that continue to run the wholesale and retail liquor operations (six additional states control just wholesaling operations), has explored the idea of getting government out of the liquor business in various ways for a number of years. Last year, voters could choose between two separate initiatives on the ballot that would have privatized the state liquor system in one way or the other. Both initiatives failed to garner enough support for passage, but one only fell just short. This year’s effort, I-1183, would sell the state-owned liquor wholesaler as well as the state-run liquor stores, allowing private wholesalers and retailers to compete for Washington’s liquor dollars. Two elements of the proposal have made this latest initiative particularly worrisome for some in the business of booze.

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Alcohol Regulation Roundup: Ale-oween Edition

by Michelle Minton on October 24, 2011

in Features, Nanny State, Personal Liberty, Regulation

http://www.openmarket.org/wp-content/uploads/2011/10/beer-draught.jpg

National: Phusion Projects, the makers of the now-infamous alcoholic energy drink Four Loko, have reportedly reached an agreement with the Federal Trade Commission (FTC). After making nice with the FDA/TTB by removing the stimulants from their product, the FTC warned that the size of the can could constitute a deceptive act. To avert another government attack, the makers of Four Loko have agreed to add a resealable top to indicate that the drinks hold multiple servings.

Also at the national level, Ken Burns’s newest documentary, “Prohibition,” has the media all atwitter with articles on modern-day issues from marijuana, jobs, and the ongoing discussion about removing the constitutional protection alcohol currently has, as do most economic activities, from discriminatory state laws. See my discussion of Prohibition’s present incarnations here.

California: Gov. Brown signs a law solving a nonexistent problem of alcohol purchase through automated checkout lines at grocery stores. As I wrote about last month, the California grocery store workers’ union has pushed this measure as a way to pressure on one of the state’s largest chains to allow workers to unionize.

Iowa: Higher-proof beer is now on tap in Iowa as the law that capped beer alcohol content at 5 percent was raised to 15 percent when former Iowa Gov. Chet Culver signed a bill into law in March 2010.

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Alcohol Myths Persist Beyond Prohibition

by Michelle Minton on October 21, 2011 · 1 comment

in Features, Nanny State, Personal Liberty

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In a recent article for the Mackinac Center for Public Policy, I make the case that many elements of Prohibition did not fade away after the repeal of the 18th Amendment. In his October 13 opinion piece for The Detroit News, former police chief Jerry Oliver proves my point by digging up an old alcohol myth — one that was used to force Prohibition on the nation. In short, Mr. Oliver expresses the belief that producers of alcohol only seek to have customers consume as much alcohol as possible, thereby making it necessary for the government to intervene in the name of “moderation.”

Historically, it was unscrupulous alcohol producers selling directly to consumers or in cahoots with bars to sell only their products, sometimes at artificially low prices, that fostered an environment for abusive alcohol consumption. It was these excesses that helped trigger the Prohibition backlash.

…Today, most states require producers to sell to state-licensed distributors who in turn sell to local retailers. Exceptions abound where specific states allow direct-to-consumer shipments from wineries…

Critics of this time-tested approach argue the system is antiquated, citing its roots to the last days of Prohibition. That’s like arguing the Constitution is antiquated because it was written in the 1700s.

While Chief Jerry Oliver is correct that Prohibition was a backlash against Americans’ increasing alcohol use (or at least the perception of increasing use) there is no evidence that the system of direct sales or “unscrupulous” producers were the cause of increased consumption. His claim that “tied houses” (saloons owned or operated by alcohol producers) caused people to drink more is the same old myth used by the Temperance movement to push Prohibition on the country. However, we now have a large body of historical evidence that seems to debunk this presumption. Using cirrhosis of the liver as a proxy, historians have found that drinking sharply decreased in the decade preceding Prohibition — even though tied houses still abounded. While incidences of cirrhosis declined further at the start of Prohibition, they rose again toward its end.

This myth of “unscrupulous” producers has been used to maintain the mandatory three-tier system that forces alcohol producers, like brewers, to rely on a middlemen — wholesalers — to get their products into bars, restaurants, and stores. The only real reason not to shift to a voluntary system is to protect the profits of middlemen, who wield considerable political power. A voluntary distribution system would allow small producers to skip the middleman and cut costs, resulting in lower prices for consumers.

Alcohol Regulation Roundup: October 7, 2011

by Michelle Minton on October 7, 2011

in Features, Nanny State, Personal Liberty

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National:

A Supreme Court decision is being heralded as potentially liberating the advertising market for tobacco and alcohol as it expands first amendment protections on all types of commercial speech. Eugene Volokh analyzed the Sorrell v. IMS Health Inc. decision and it’s implications on whether or not commercial advertising may be generally restricted on the grounds that it might persuade people to do something that the government thinks is bad.

Also in National news, the neo-prohibitionist group “Alcohol Justice,” (formerly known as the Marin Institute) is taking aim at Facebook. The group claims that Diageo, makers of popular drinks such as Guinness, have struck a “youth oriented” advertising campaign with the social media site and they are demanding that the Federal Communications Commission step in.

Georgia: One of the last few states to overturn its statewide ban on Sunday sales will soon give each district a chance to vote on whether to keep the ban or open up Sunday liquor sales.  Georgian towns will vote on the referendum on November 8.

Massachusetts:  In September, Attorney General Martha Coakley announced approval for proposed ballot questions in the 2012 election, including a proposal to end the ban on grocery store beer and wine sales. Also approved were questions about legalizing medical marijuana and repealing the state’s health care law.

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State Losing Control of Pennsylvania Liquor

by Michelle Minton on September 12, 2011

in Deregulate to Stimulate, Economy, Nanny State, Odds & Ends, Personal Liberty

Privatizing Pennsylvania’s liquor stores has been a subject of debate for decades. Proposals in the past have been met with fear about the effects privatization would have on public safety and skepticism about the need for change. Most recently, Rep. Michael Turzai, Pennsylvania’s House majority leader, introduced a bill that would sell of state-owned liquor stores and provide more licenses for private businesses to retail liquor and wine and this time it looks like the proposal might have a chance.

The difference this time around is residents’ increasing frustration with the Pennsylvania Liquor Control Board’s draconian policies, and the growing body of evidence that privatized liquor sales would not adversely affect public safety. In fact, privatization would increase choices for residents and would actually bring more money into the state than the current government control system.

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Alcohol Regulation Roundup: Independence Day Edition

by Michelle Minton on July 5, 2011 · 4 comments

in Deregulate to Stimulate, Economy, Features, Nanny State, Personal Liberty

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Hopefully, this Independence Day weekend you liberated some nice libations from their containers. As Founding Father Ben Franklin said, “there can’t be good living where there is not good drinking.” If he’s right, then this week’s alcohol regulation roundup would probably bring a smile to old Ben’s mug — as the changes in most states’ alcohol laws mean that the quality of life in this country is clearly improving.

Alabama: At the end of May, the Alabama legislature approved the Craft Brewery Modernization Bill after much effort from the state-based beer rights group Free The Hops (FTH). Just last month, Governor Robert Bently signed the bill into law, allowing breweries to give visiting patrons a taste while they tour the brewery. Unfortunately, another bill that would have allowed residents to brew for at-home consumption without a license (illegal only in Alabama and Mississippi), failed to make it through the legislature.

Kansas:* When it comes to selling alcohol to patrons, convenience and grocery stores in Missouri are restricted to 3.2 percent ABV beer and wine coolers. Liquor stores may sell liquor and wine, but are banned from selling groceries. However, efforts to change the outdated laws are underway. Republican Senator Tim Owens has been pushing a bill that, if passed, would abolish both prohibitions, allowing grocery stores to sell full-strength beer and liquor and permitting liquor stores to sell grocery food items.

Maryland: Good and bad news for Maryland’s drinkers, as laws passed earlier in the year went into effect last week. Liquor taxes went up by 50 percent, with projected revenue increases of $85 million. On the positive side, the state’s new laws allowing direct shipping for wine also went into effect.

Michigan: A bill that would eliminate a 1.85 percent sales tax on distilled spirits is making its way through the Michigan legislature.

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Alcohol Regulation Roundup: June 10, 2011

by Michelle Minton on June 10, 2011

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty, Regulation

Reporting from around the nation on the ridiculous, the sad, and the sometimes positive news about the state of alcohol regulations.

National: BuyaBeerCompany.com, a website set up by two ad execs hoping to purchase Pabst Brewing Co. with donations from individuals, was shut down by the SEC. Michael Migliozzi and Brian William Flatow were able to find 5 million people who agreed to invest a total of $200 million to purchase the brewery. Apparently, they were supposed to register the public offering with the SEC first. Since the men haven’t actually collected money, the SEC reportedly reached a settlement with the two gentlemen, rather than charging them with violations of federal law.

Alabama: A silly law that requires brewpubs in Alabama to operate within an historic building might be overturned. The House of Representatives passed legislation removing that requirement for brewpubs to obtain licenses. The bill also removes restrictions on brewing and allows the pub owner to sell their product to wholesalers in order to distribute their product beyond the brewpub.

Maryland: The Prince George’s County Board of License Commissioners is considering rule changes that would, among other things, allow county liquor stores to accept call-in deliver orders from residents. Not everyone in the state is happy with the proposed changes.

Ohio: Legislators in Ohio want to raise the cap on how high the alcohol content can be in beer from 12 percent to 18 percent. A provision in the proposed state budget would do just that, to the delight of brewers and craft beer lovers in the state.

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Why You Should CARE About the Ban on Four Loko

by Michelle Minton on November 17, 2010

in Health and Illness, Nanny State, Personal Liberty, Precaution & Risk, Regulation

Late yesterday evening, the maker of Four Loko announced it was removing caffeine from the popular alcohol beverage. This came following media-driven hysteria, state bans, and a potential federal ban from the FDA. My colleague Greg Conko analyzes the likely FDA regulation here.

You might not like the idea (or the taste) of Four Loko, the popular beverage that combines caffeine, other stimulants, and 12 percent alcohol in a candy-colored 23.5 ounces. But if you do like any alcohol beverage or any other product that could be remotely controversial, you should care about the banning and treatment of Four Loko and other similar alcohol energy drinks by government officials.

While several states have banned or taken steps to ban Four Loko and other similar products, which some believe contain a dangerous cocktail of caffeine and alcohol, the most disturbing developments occurred in New York where the product was not banned through a legislative process. Rather, it was intimidation and strong-arm tactics, including “convincing” the state’s largest distributors to “voluntarily” agree to stop selling the beverage, and conducting raids on bars and restaurants serving the drink. According to an account by Eddie Huang, the owner of New York City restaurant Xiao Ye, which proudly serves Four Loko, the New York State Liquor Authority (SLA) raided Huang’s restaurant last Friday night, just before announcing the deal with distributors not to sell Four Loko. Eddie reacted to the raid on his blog:

We followed the law, we were in line with the SLA requirements, but basically, it was understood that if we kept selling Four Loko, we would be seeing a lot of raids… All Four Loko in the house was destroyed on site, it was taken off the menu, and four Loko Thursdays is cancelled.

It still isn’t certain that the SLA actually destroyed any of the product (the SLA denies destroying any Four Loko), but the raid is obviously meant to scare Eddie Huang from promoting the drink at his restaurant. The “voluntary” agreements with the large distributors is disturbing alone, especially when one considers that future federal legislation would likely make it impossible to get beer any way other than going through a distributor.

The CARE Act (H.R. 5034) would prevent the federal government from using the dormant Commerce Clause to stop states from enacted discriminatory laws against out-of-state producers of alcohol. My colleague Angela Logomasini describes the proposed legislation here.

Of particular concern is the fact that the new legislation would almost certainly be used to prevent direct shipping of wine, beer, and any other alcohol beverage. This means that retail operations would be forced to rely on distributors to get the products their consumers want. If one regulator has an issue with a particular product, vineyard, or brewery, he or she could convince distributors to “voluntarily” agree not to sell the product.

The FDA: Banning Out of Fear

For the last few years a widespread skepticism about alcohol energy drinks (AEDs) has prompted the FDA and other regulatory agencies to investigate the products. In 2008 MillerCoors “voluntarily” agreed to reformulate their massively popular drink called Sparks after state attorneys general applied pressure to the company.  In 2009, the FDA jumped into the debate when it sent letters to several manufacturers AEDs, giving them 30 days to produce evidence showing that the alcohol-caffeine combo is safe for consumption.

Now the FDA has set it sights on Four Loko and will likely announce their decision today on whether caffeine is a “safe” ingredient to add to non-cola products. Such a decision could impact many more beverages than Four Loko alone.

Lawmaking that is based purely in panic and on anecdotal evidence as opposed to scientific is nothing new. The FDA and state lawmakers are up in arms about Four Loko as a result of a few isolated incidents of people behaving badly while drinking the product. Whether or not their is a direct correlation between the behavior and consumption of the product is not known and doesn’t seem to matter to the FDA or state regulators.

Whether or not you like Four Loko, you should defend consumers, retailers, and restaurant owners’ right to make the choice for themselves whether or not they want to buy or sell a product.

CEI saw this wave of misguided, manufactured outrage coming. Earlier this year, we published a study on alcohol energy drinks (AEDs) by Baylen Linnekin, “Extreme Refreshment Crackdown,” on FDA’s continued harassment of AED manufacturers and the lack of evidence supporting their alarmist claims.

Image credit: The Wisest Wizards’ flickr photostream.

Virginia ABC Store Privatization: Improving Plan, Dimming Political Support

by Michelle Minton on October 1, 2010 · 2 comments

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty, Regulation

When Virginia’s governor Bob McDonnell’s unveiled his plans for privatizing the state-run liquor sales system nobody was terribly thrilled. The plan’s basic outline (as I have written about before) is that the state’s 332 state-owned stores and auction off 1,000 licenses. The plan included some new fees on wholesalers, restaurants, distributors, and slightly reduced the per gallon excise tax on spirits.

The Proposed Privatization Plan:

1,000 Retail Licenses Up for Auction

600 Tier 1 licenses (i.e. grocery stores) cost=  min. bid + $2000/year

150 Tier 2 licenses (i.e. specialty stores) cost = min. bid + $1000/year

250 Tier 3 licenses (i.e. convenience stores) cost = the min. bid + $500/year

Wholesaler Fees: Licensing fee= 2.5x profits of spirits lines to be distributed

Excise tax: $17.50 per gallon

Previously, the plan had included a 2.5 percent tax on restaurants’ sales of liquor. This “fee” would give restaurants the privilege of buying liquor at wholesale prices and have the goods delivered to their business; this was one of the gripes smaller businesses had with plan, saying that it would negatively impact “Mom & Pop” businesses. Their complaints were apparently taken into account by the McDonnell team which announced changes to the plan on Thursday, including the deletion of this 2.5 percent tax.  They also eliminated the 1 percent annual tax on wholesalers’ gross receipts.

As this article in The Washington Post notes, the changes are likely to garner support from businesses as well as fiscally conservative legislators, but it will only increase the displeasure of those skeptical about the financial implications of privatization.

…the revision will probably deepen concerns of lawmakers who think privatization will be a bad deal for the state over time. McDonnell’s projections show that with the modifications, his plan would result in $47 million less each year to fund such state services as schools and police.

The revisions highlight a central conundrum McDonnell faces as he attempts to sell his complex proposal: Changes he might make to satisfy the concerns of some lawmakers are likely to cost the support of others.

While politicians are understandably concerned about the financial state of the Commonwealth, loss of tax revenue is no justification for doing away with a government service that they have admitted does no good for the people of Virginia and in fact impedes sales of and access to liquor. Additionally, legislators do not seem to understand that once liquor is widely available in Virginia and comparably priced to other states, the sales of other types of alcohol will also increase. About 70 percent of wine drinkers also drink spirits, and research by DISCUS (the Distilled Spirits Council of the United States) shows that in Washington, D.C., there is a ratio of about 3 cases of wine for every 1 case of spirits sold. Their research clearly shows that Virginia residents are primarily purchasing their liquor in the District.

On that note, here is a sample of statistics about the current sad state of liquor sales in Virginia as compared to the U.S. on average and neighboring states:

Outlet Density in Virginia: Density of liquor store outlets in Virginia is 0.6 per 10,000 adults

Outlet Density in the U.S.: Density in the U.S. on average is 3.2 per 10,000 adults

Sales in Virginia: Liquor sales rate is 1.62 gallons per adult

Sales in the U.S.: 2.04 gallons per adult

Sales in D.C.: 4.46 gallons per adult

Excise Tax on Liquor in MD/D.C.: $1.570 per gallon

Excise Tax on Liquor in Virginia: $20.13 per gallon

It is time to set aside fears and get government out of the business of selling liquor. Loss of general fund revenue is a bogus reason to oppose the plan: government shouldn’t be griping about losing money it had no right to it in the first place. They have admitted that the government monopoly on sales provides zero benefit for Virginians, so it’s time to get rid of it and find money somewhere else (maybe cutting programs?). The fear that privatization will result in 1,000 new liquor stores is unfounded as most of the licenses will be sold to stores already selling wine and beer, actually decreasing liquor stores. Finally, fears about crime and traffic fatalities are unfounded, as case studies of other states that have undergone privatization show no rise in these ills.

Though the privatization plan may not be perfect, if it gets the government out of the sale of liquor, it is a step in the right direction.

VA Liquor Privatization Bought with Higher Taxes?

by Michelle Minton on September 8, 2010 · 1 comment

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty, Regulation

Free marketeers in the Commonwealth of Virginia waited with high hopes after Governor Bob McDonnell made the announcement that he planned to privatize state-run liquor stores in the state.

In the beginning, McDonnell’s rhetoric sounded good:

[I]t’s getting the government out of the business of alcohol distribution, which I don’t think it needs to be in. We’ve [sold] beer and wine [privately] for 70 years; we can certainly do distilled spirits” in the same way.

Unfortunately, it proved to be just that: rhetoric. It was pretty clear from the start that his ultimate motivation was the state budget’s bottom line. That fact was reinforced with the news that McDonnell’s privatization plan includes a bevy of new taxes on businesses:

4 percent tax on restaurants and bars… Included in the 4 percent is a 2.5 percent tax imposed solely on restaurants’ annual liquor receipts and a 1.5 percent tax imposed on restaurants and all stores that sell alcohol, including grocery stores…McDonnell’s proposal also includes other fees, including a $17.50-per-gallon excise tax and a 1 percent tax on gross receipts, both charged to wholesalers

While this increase in taxes speaks negatively toward McDonnell’s convictions, just as bad are his plans to limit the number of licenses available. Initially, Bob’s plan is to auction 1000 licenses to the highest bidders, but there’s no indication that more licenses will be available once those are all sold.

Licenses will be divided into three categories: big-box stores, such as grocery stores and Wal-Mart (600 licenses), package stores (150 licenses), and convenience stores and drug stores (250 licenses)

Though the committee was set to vote on the measure today, plans were postponed due to the fact that a completed proposal wasn’t made available to committee members.  It seems we’ll have to wait until November to see how far McDonnell strays from his supposed free market ideals.

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