Alcohol Reform Round-Up

A few Snow Day thoughts and links on alcohol reform:

  • As it seems increasingly likely that we’re going to get some kind of state store privatization plan, I’d like to encourage the news media, bloggers and advocates to avoid using the term “privatization” as a perfect substitute for “what Mike Turzai wants to do.”

    There are many possible ways to do this. The terms “alcohol reform” or “alcohol policy reform” or “alcohol sales reform” would all helpfully broaden the debate.

  • I’m especially disappointed in the Commonwealth Foundation, who, despite a stated interest in free enterprise, appear to regard the plan that is best for the beer distributors as the only possible conception of reform. This issue is a perfect candidate for liberaltarian coordination on a pro-growth free market plan, but CF is supporting the license caps to protect rent-seekers. Democrats have to run afoul of public sector unions, Republicans, have to run afoul of the beer distributors, there’s a little poison for everybody but we end up with cleaner demand-side regulations, more consumer choice, and less deadweight loss. It’s too bad CF’s rent-seeker money isn’t where it’s free market mouth is.
  • Lew Bryson has a great post on the political economy of past failed attempts at alcohol policy reform.
  • Here is the Bill White plan:

    • Close the state stores.
    • Sell liquor licenses to private buyers and let them compete.
    • Allow grocery stores and convenience stores to sell beer and wine.
    • Allow Pennsylvanians to order and receive wine directly via the Internet.

    I am glad Bill agrees that if there’s a drop in revenue, the Republicans need to “make sure through liquor taxes that after the one-time windfall — Tom Turzai, the leader of the new Republican majority in the state House, estimated it at $2 billion — of selling those licenses, we aren’t left with a giant hole in our annual state budgets.”

    One thing I’d like to see analyzed in greater detail is what impact different options would have on the price of alcohol. The Commonwealth Foundation claims that current system “forces Pennsylvanians to pay up to 50 percent more for liquor than in other states-many of which offer a variety of wines not available in the Commonwealth, and allow wholesalers to deliver the spirits right to your door.”

    If it’s true that prices will drop under the Turzai plan, that’s going to increase consumption at the margins, so we would expect tax revenue collections to increase.

  • A large decrease in alcohol prices, however, would be bad news for problem drinkers. As a public health concern, I think the state should make up the difference by raising alcohol taxes to maintain the current price level, and using the revenue to lower the sales tax
  • The AP reports that we’re going to get some new numbers on the Turzai plan:
    Republicans lawmakers who back the sale of the state-owned liquor store system are pursuing an independent study to determine the value of privatizing the licenses.

    House Republican spokesman Steve Miskin said Wednesday that GOP lawmakers will select a firm that is pre-qualified by the state Office of Administration to carry out such a study

    I would really like to see a study like this one from Washington State that compares a variety of different policy options. The Turzai Way is definitely not the best option for consumers. Here is the one I like best:

  • *Bonus questions* How much of the “border bleed” effect can be explained by tax differentials? Compare PA to its neighbors’ spirits tax per gallon:

    PA $6.65
    OH $8.73
    DE $5.46
    NJ $4.40
    WV $2.05
    MD $1.50

    How does this all net out? I’d expect to see PA border bleeding into all of these except OH. Do people in Western PA talk about border bleeders from Ohio? And at what distance from the border is this an issue? How far would you drive to pay 50% less for a handle of liquor? Say a bottle of Jameson is $25 in NJ, and $37.50 in PA. How valuable does the difference feel at 10 miles? 20? 30?

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