Here’s a key point for the alcohol policy reform debate from Nathan Lutchansky at the PLCB Users Group blog.
Tom Corbett has said that he wants to raise $2 billion from privatizing the state stores, but as you can see in the chart above, the state stores do not contribute $2 billion to the General Fund.
All of the taxes here are still going to be collected. The legislature only has to replace about $125 million more in revenue per year. That can be accomplished fairly easily by trading the Johnstown Flood Tax for a gallonage tax that includes poured alcohol.
Here’s Nathan with a good illustration of the market distortions that result from not taxing poured alcohol at the point of sale:
Pennsylvania has one of the lowest beer tax rates in the nation (behind only Missouri and Wisconsin), but the excise tax burden on wine and spirits is enormous. Per drink, we pay more than three times the state tax of New Jersey or Delaware, and almost eight times the state tax of Maryland.
If you broaden the tax base, you can lower the tax rate. Removing the cap on liquor licenses would also be a good way to broaden the tax base, since you’d have more bars collecting revenue.
Needless to say, public health concerns should weigh heavily on considerations of how much lower the tax rate can go.