Does federal tax reform for booze now have majority support in Congress?

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One of the main alcohol reform pushes at the federal level is the Craft Beverage Modernization and Tax Reform Act, which would lower federal excise taxes on all types booze. The act has garnered bipartisan support in years past, but has failed to make it through Congress. According to Brewbound, however, the act has now achieved majority support in the U.S. Senate:

A majority of U.S. Senate members now support legislation that would reduce excise taxes on all brewers and importers.

According to a press release jointly produced by six beverage lobbying groups, including the Beer Institute and the Brewers Association, 51 senators have co-sponsored Senate Bill 236, known as the Craft Beverage Modernization and Tax Reform Act (CBMTRA).

The legislation, which was introduced into the Senate on January 30 by Ron Wyden (D-OR) and Roy Blunt (R-MO), also has majority support from 281 members of the U.S. House of Representatives who have backed a companion bill (H.R. 747).

Full article here. DrinksReform.org will continue to monitor the act's progress in the coming months. As R Street's Jarrett Dieterle has noted, the current version of the act no longer includes a provision that would legalize home or hobby distilling (past versions of the bill did include this reform).

 

R Street's Jarrett Dieterle Writes About Moonshine History for NPR

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R Street's Jarrett Dieterle wrote a piece for NPR's The Salt (winner of the James Beard Award for best food blog) on Virginia moonshining history:

In 1620, the Rev. George Thorpe sent a letter from a plantation near Jamestown, Va., to England describing a "good drinke of Indian corne" that he and his fellow colonists had made. Historians have speculated that Thorpe was talking about unaged corn whiskey, and that his distillation efforts on the banks of Virginia's James River might have produced America's first whiskey. Nearly 400 years later, Belle Isle Moonshine, just 30 miles away, up the river in Richmond, is again producing unaged corn whiskey — what it calls moonshine.

Across the nation, moonshine is booming. Sales have increased by 1,000 percent nationwide between 2010 and 2014, according to the market research firm Technomic. Some places, like Gatlinburg, Tenn., even use moonshine as a tourist draw. But the revival has been especially strong in Virginia, where many of the twists, turns and car chases that are a part of moonshine lore took place.

The whole article can be found here.

New Hampshire Legislature Introduces Bill to Legalize Home Distilling

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A bill was recently introduced in the New Hampshire legislature that would legalize home distilling in the state. Even if the bill passes, however, hobby distillers in the Live Free or Die state won't be able to start making spirits right away. That's because home distilling still remains illegal at the federal level, which means the Hew Hampshire law would only take effect if the feds also legalize home distilling. According to the Hobby Distiller's Association, 8 other states currently have similar laws that would allow home distilling if the feds ever give it the green light.

R Street's Jarrett Dieterle has has written about home distilling in the past and the federal efforts to legalize it:

In the aftermath of its failure to pass a health-care overhaul, Congress appears poised to turn to tax reform. While income and corporate tax rates will likely garner most of the attention, alcohol producers are also hoping for changes to booze taxes. Specifically, brewer, vintners, and distillers have been pushing on Capitol Hill for the Craft Beverage Modernization and Tax Reform Act, which would lower federal excise taxes on alcohol.

Despite attracting nearly 300 co-sponsors in the House and more than 50 in the Senate, the bill has failed to get a vote in recent sessions of Congress. There’s renewed hope for the act this year—perhaps as part of a larger tax overhaul—but the current version of the bill is missing a key feature of previous iterations: the legalization of home distilling. Whereas the 2015 version of the act included a provision that would have permitted distillation of up to 24 proof gallons per year for personal consumption, that provision has been stripped from the new version of the bill.

Dieterle points out that home brewing and winemaking is already legal and argues that home distilling should be too (full article here).

L.A. to Restrict How Alcohol is Sold at Gas Stations

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The Los Angeles City Council has voted to place additional strictures on how alcohol can be sold at local gas stations. The new regulations prohibit things like selling alcohol within 5 feet of the cash register and advertisements that are visible from gas pumps. The purported rationale is reduce drunk driving and alcohol sales to minors, according to NBC 4 Los Angeles:

A Los Angeles City Council committee voted Tuesday in favor of adopting stricter enforcement of the sale of alcoholic beverages at gas stations in an effort to reduce drunk driving and the availability of alcohol to minors...

In California, the manufacture, distribution, storage and sale of alcohol is regulated by the Department of Alcoholic Beverage Control, but the city is responsible for permits to operate gas stations and other businesses...

Violations of the sale of alcohol at a gas station include:

  • No beer or wine shall be displayed within five feet of the cash register or the front door unless it is in a permanently affixed cooler as of Jan. 1, 1988.
  • No advertisement of alcoholic beverages shall be displayed at motor fuel islands, buildings, or windows.
  • No sale of alcoholic beverages shall be made from a drive-in window.
  • No display or sale of beer or wine shall be made from an ice tub.
  • Employees on duty between the hours of 10 p.m. and 2 a.m. who sell beer or wine shall be at least 21 years of age.

The rest of the story can be found here.

How control states use liquor markups as secret taxes

Today, R Street's Jarrett Dieterle released a policy paper on how control states use liquor mark-ups as a form of backdoor taxation. He argues that government-imposed mark-ups are analogous to taxes since they are often used to fund the government at large:

In states that hold a monopoly on the sale of spirits, liquor prices usually are set by a formula that includes at least one of three different components: taxes, fees and price markups. Markups are formally enacted by liquor regulators—usually in the form of a board—who are tasked to oversee alcohol sales in the state. In recent years, governments in these so-called “control states” have relied more and more on the revenue derived from these markups, as state lawmakers frequently have included calls for higher markups in their budget proposals.

These artificially created price bumps exceed the level of increase that would be sustained on the open market and the revenue from these increases often accrues directly to a state’s general fund. In this way, they function very similarly to taxes. Furthermore, liquor markups are readily distinguishable from nearly every other form of government-imposed fee, since they target a good designed for private consumption. Perhaps worse is that, despite their clear resemblance to taxes, markups frequently do not need to be ratified by state legislatures in the way that other taxes do. This allows lawmakers in control states effectively to hide the cost from state taxpayers.

The rest of the paper can be found here.

Reason's Eric Boehm also penned an article specifically about Pennsylvania's liquor mark-up system, which cites Dieterle's paper and suggests that such mark-ups could be illegal since they weren't ratified by the state legislature:

 A new paper published Thursday by Jarrett Dieterle, a fellow at the R Street Institute in Washington, D.C., questions whether state-run liquor operations charging what amounts to secret taxes in the form of price mark-ups on alcohol are illegal.

The PLCB used to apply a 30 percent mark-up on the wholesale price of liquor, but recently switched to a variable markup that fluctuates from product to product. Either way, that added fee is "a tax in everything but name," says Dieterle.

The mark-up system lacks accountability, because taxpayers can't remove PLCB board members at the ballot box. A lawsuit built on Dieterle's premise could undermine the state's ability to continue collecting this unseen tax.

"This setup ultimately allows state officials to hide the bill from taxpayers and to rely on what amounts to backdoor taxes to plug budget gaps, all while avoiding politically contentious policy decisions," Dieterle says.

More here.

 

Could Michigan's Half-Mile Liquor Store Rule Be Revived?

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Michigan's Liquor Control Commission recently repealed the state's "half-mile rule," which prevented liquor stores in the state from operating within a half-mile radius of each other. According to Michigan Capitol Confidential, there's a chance the state legislature could override this reform:

"The state of Michigan is believed to have been the only state in the country that imposed a peculiar prohibition on one liquor store being located within a half-mile of another liquor store.

That changed when the Michigan Liquor Control Commission rescinded the restriction on Sept. 26. But it could be reinstated if two bills pending in the Michigan Legislature are passed and signed by Gov. Rick Snyder. They would override the commission’s decision and restore the half-mile restriction.

Jarrett Skorup, the author of a study published by the Mackinac Center for Public Policy on how licensing laws hurt consumers, testified before a House committee on the legislation.

Skorup said other kinds of businesses operate without a law banning competitors from operating within a half mile.

'Meijer isn’t real happy when a Kroger operates nearby and they would love a law that prevents them from doing so, but the Legislature won’t pass that because we believe in the spirit of competition.'..."

Read the rest of the article here.

 

Selling Whiskey Online Could Land You In Jail

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Chuck Cowdery has a new post up at his blog about how the secondary alcohol market is mostly illegal in the United States:

Whisky Advocate Magazine devoted most of its Fall 2017 issue to whiskey collecting and whiskey collectors. It is hard to collect seriously if you can only obtain whiskey through retail channels. In virtually all forms of collecting, most acquisitions come from the secondary market, either directly from other collectors, or indirectly through dealers.

But there is a problem. While secondary sale of beverage alcohol is permitted in much of the world, in the United States, with a few small exceptions, it is not. Both state and federal law prohibit the sale of any alcoholic beverage to any person unless you have the appropriate license or licenses. Penalties vary by state. In California it is a misdemeanor, punishable by a $1,000 fine and/or up to six months in county jail.

Read the whole post here.

R Street has previously advocated for freeing up the secondary market, and we also recently covered news from Pennsylvania about a man who was arrested for selling a bottle of booze on Craigslist. 

Breweries Face Class Action Suits for Alleged False Advertising

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In recent years, numerous breweries have found themselves facing lawsuits for alleged false advertising and labeling on their beer products. One prominent recent example is Kona Brewing Company, which features maps of Hawaii (as well as other island-themed images) on its packaging. Because its beer is not actually made in Hawaii, Kona has found itself on the receiving end of a class action lawsuit--even though its beer labels specifically disclose this fact. Greg Herbers of the Washington Legal Foundation writes about the judge's recent ruling in this case, which appears set to go to trial:

"We have been covering a legal action against Kona Brewing Company (now renamed Broomfield v. Craft Brew Alliance), which is one suit in the larger trend of class actions against breweries alleging misleading or false labeling and advertising.  In that suit, Judge Beth Labson Freeman, who sits on the U.S. District Court for the Northern District of California (a.k.a. the “Food Court”), recently ruled on Kona’s motion to dismiss.

Though the court trimmed the complaint, dismissing several of the plaintiffs’ causes-of-action and requests for relief, it held that the crux of the allegations could proceed.  The result is that, through strategic pleading, Kona must spend its time and resources fighting a lawsuit with questionable merits.  Judge Freeman created perverse incentives for future litigants by choosing to become, in essence, a product-packaging regulator..."

Read the whole article here.

Pennsylvania's Governor Calls for Securing a Loan With State Liquor Profits

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Control-states have long sought to balance their budgets on the backs of their government-run alcohol systems. And given that state-run liquor regimes usually kick off significant profit--Virginia's has been called "the golden goose of the commonwealth"--it is perhaps unsurprising that politicians often seek to get their hands on it. Pennsylvania Gov. Tom Wolf has now gone a step further, however, by floating the idea of using the profits derived from the state's liquor system to securitize a $1.25 billion loan to help the state balance its budget. As Law360.com notes:

"[Gov. Wolf] announced Wednesday that he would borrow against profits from the state's liquor system to raise $1.25 billion, money that would pay off the state's prior year deficit and reduce the need for additional temporary borrowing to meet financial obligations.
 
Officials for the Pennsylvania Liquor Control Board said the organization's finances were on solid footing, with profits and income growing modestly over the last year..."

Read more here. Gov. Wolf's full statement on the issue can be found here.