To Expand PA Restaurant Industry, Uncap Tavern Licenses

I like that Bob Casey thinks we should take the food service sector seriously, but this proposal is really too weak to satisfy:

U.S. Sen. Bob Casey announced a bill today in Allentown to extend a tax advantage for small businesses that he said would particularly help restaurants build and expand.

Casey’s bill would permanently extend a 15-year tax depreciation period for capital improvements and new construction by restaurants and retailers. Without an extension, the law reverts to the original 39-year period at the end of the year, which Casey said would curtail business expansion at a time when it’s needed.

It’s not that this is a bad idea, but at the federal level where Senator Casey is working, the better policy would be full employment – more fiscal stimulus to tighten up the labor market, and create more demand for prepared food. It’s not that we shouldn’t extend the depreciation, but the real problem restaurants are having is that there are too few customers. To expand, restaurants need more people to have jobs and disposable income.

The second biggest opportunity for policy action to help restaurants expand and prosper is at the state level, where state liquor license caps are choking off growth in the restaurant and bar sector in many PA cities.

By artificially limiting the supply of restaurant liquor licenses to 1 per 3000 people in each county, state government is dooming many older downtowns with too many vacant storefronts in areas that “want” to be entertainment clusters. And they’re depriving most restaurants of a high mark-up menu item that would make their businesses more profitable and stable.

There does not have to be a scarcity of tavern licenses. Every restaurant could be cross-subsidizing their food with booze profits just like movie theatres cross-subsidize films with popcorn and soda. We can let every restaurant sell booze, increase their profits and employee wages, and expand their businesses. And we can do this at no cost to the taxpayers, since it is free to print more licenses.

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