liquor

Democratic Senator James Beach introduced a set of bills earlier this month that, if passed by the New Jersey state senate, will make it easier and cheaper for restaurants and stores to obtain the necessary licenses to serve and sell liquor. Attempts like this to liberalize the sale of alcohol are certainly a step in the right direction. Though alcohol has been legally served in the US for 77 years, it should be a sobering revelation to every citizen that the impetus for restoring our right to free choice is money and not freedom. Yes, the reforms in New Jersey would be a step in the right direction, but we’ve still got a long way to go before we can really shake the hang-over regulatory policies from prohibition.

Because NJ’s licensing scheme works  much like taxi cab medallions, there is a limited number of licenses available in each municipality and no way for counties to sell their licenses to one another. Two of the bills introduced by Sen. Beach would increase the amount of liquor licenses by allowing their sale at “fair market value,” to other municipalities within the state. A third bill would create an entirely new type of license for restaurants. This new class of licenses allows for beverage sales along with food service at tables. These licenses are unlimited (unless a municipality chooses to limit the number) and the cost to purchase is capped

Wasted Time:

Getting a license to sell liquor in New Jersey is complicated, competitive, and time consuming. Because of their limited availability (each municipality is allowed to issue one tavern or bar license for every 3,000 residents, and one license for a packaged-goods store for every 7,500) they are rare and highly valued. For example, restaurant owner Ron Squillace had to wait 5 years and pay $300,000 before finally acquiring a license to distribute alcohol at his trattoria. That is five years that his BYOB had to compete with all the other restaurants in the area that could offer diners a glass of red wine with their eggplant parmesan.  Currently there are around 9,300 licenses-a decline since the 80′s as licenses have expired. Most small business owners can’t afford that kind of expense, and with a failure rate of about 50% over five years the inability to compete with well-established and chain restaurants that can afford the hundreds of thousands of dollars to buy liquor license, it makes success all that much more difficult.

Buzz-kill: Opposition to Reform:

Predictably, the major opponents to the proposed overhaul-especially reforms that make it easier for grocery stores to sell alcoholic beverages, are liquor store owners. They complain that since grocery stores can sell a greater variety of liquor, are more convenient, and cheaper, that “Mom and Pop” liquor stores will be unable to compete. They may be right. However, their business model is built on a niche created by a regulatory injustice. Nobody would have listened to mobsters or speak-easy owners had they complained that ending prohibition would put them out of business. If small liquor stores can find no other way to compete in the wake of reforms it will be sad, but it will be a small price to pay for economic liberty.

Addicted to the money: It’s only a problem if politicians admit it.

The fact of the matter is that a lot of old alcohol regulation remains in place because of the money and power they generate. Restricting the number of licenses makes them very valuable and because restaurants able to obtain them have a competitive leg up on other establishments owners are willing to spend just about whatever it takes to get them. Take for example, the fact Squillace was willing to wait 5 years and pay $300k in order to compete with other restaurants already able to serve alcohol with meals  waited 5 years and spent at least $300k to obtain the license that would allow him to compete with other restaurants already able to serve alcohol with meals. And who knows how many officials he had to bribe or incentivize to move the process along.

Drunk with Power: Abolish liquor licensing.

The bills introduced by Sen. Beach represent a significant step toward increasing the available licenses in the state and reducing the cost of purchasing a license for businesses. However, it still does no correct the real injustice, which is the government overstepping its authority. It isn’t there to take money from business owners or tell them what they can sell to their customers.

After 77 years of milking the beverage regulation cow, it is understandable that NJ lawmakers are having a tough time walking away from all that power and money.  While increasing the number of available licenses make it easier and cheaper for restaurants and less likely that they’ll fail, thereby increasing tax revenue generated in the state, the need for reform is not about money; it is about the proper role of government and correcting the sins of the past (aka prohibition).

If New Jersey politicians want a vibrant economy and a just government actually of, by, and for the people [all the people not just the politically connected and rich] it should consider abolishing licensing all together; allow all restaurant owners the ability to serve alcohol without the necessity of first paying tribute to the state in order to make a living.