Inside the booming black market for bourbon (and why it should be legalized)

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Selling secondhand liquor--even if unopened--is illegal, but that hasn't stopped a thriving black market from taking off. Adam Allington reports for Marketplace:

"Bourbon, America’s only “native spirit,” has been riding a wave of popularity like it hasn’t seen in 50 years, driven by a combination of savvy marketing and a resurgence of cocktail culture.

Bourbon has become so popular that many of its most precious labels have become nearly impossible to buy at the retail level. That is, most liquor stores don’t carry them, and the few that do are only given an allocation of a few bottles per month. This has lead buyers to seek out their whiskey on secondary markets... And while it’s illegal to sell alcohol without a license, thousands of people do it..."

Read more here: https://www.marketplace.org/2017/06/14/business/bourbon-market-heats-creating-black-market-demand

This gets at an issue R Street's Kevin Kosar has written about--namely, there should be a legal secondary booze market, rather than forcing these types of sales to go underground. As Kosar put it:

It is a confounding situation, which means, of course, it was created by government. People long have been free to sell their stuff. One need only visit an antique shop or a Goodwill store. There is a market for nearly everything, whether old baseball cards, DVDs and music cassette tapes, or jewelry, antique knives or eye glasses. The garage sale is an American tradition.

Yet various laws forbid consumers from reselling a previously purchased alcoholic beverage, even if it has not been opened...

[I]ndividuals should be free to resell alcoholic beverages without any sorts of restrictions. The market, over time, will sort out the good sellers from the bad (rather like the used goods markets on Amazon.com, eBay.com and the like.) However, to satisfy concerns about fraud, safety and counterfeiting, one might establish a system like that which exists for gun sales. Only licensed purchasers could buy secondhand drinks, and they then could sell them to the public. Purchasers would be required to record their inventories and make them available to the Alcohol and Tobacco Tax and Trade Bureau. Sales could even be taxed, as auction house sales of old drinks are.

Either way, the sensible path forward is to make the resale of beers, spirits and wines legal. Continuing to ban the resale of drinks will only ensure that the black market continues...

Kosar's whole piece is worth reading: http://www.rstreet.org/2016/04/20/lets-free-the-antique-alcohol-market/

 

 

Alabama legislature and Gov. Ivey pass bottle on tax hike to ABC Board

Alabama's ABC Board recently approved a 5-percent increase in the state liquor markup, with the proceeds scheduled to go toward funding state district attorneys and courts. R Street's Cameron Smith attempted to unpack the logic behind the Board's decision but found it lacking:

We don't need the Alcoholic Beverage Control Board (ABC) in Alabama. It's a bureaucratic dinosaur waiting for its extinction-level event. Now, the ABC has done the dirty work of raising taxes for the Alabama Legislature and Governor Kay Ivey.

The ABC approved a 5 percent "markup" on liquor on June 14, 2017. The measure is expected to raise $8.2 million next year. The Alabama legislature conditionally earmarked $6 million of the increase for district attorneys and $2.2 million for the Unified Judicial System.

Don't believe for a minute this is a routine action by the ABC.

Over the last several decades, two of Alabama's 67 counties--Marshall and Calhoun--successfully passed "local bills" imposing a 5 percent tax on liquor above the fees and taxes collected by the ABC and the state. Many other counties have tried to pass similar measures and failed.

The ABC suddenly believes the relatively insignificant price disparity on a bottle of liquor in Alabama is a problem worth addressing.

"The change in mark-up will keep the price of a bottle (except in Calhoun and Marshall counties) basically the same everywhere in Alabama, and negates the need for the local sales tax bills," wrote ABC Board spokesman Dean Argo.

Let me parse out that logic...

Read the rest here: http://www.al.com/opinion/index.ssf/2017/06/legislature_and_gov_ivey_pass.html

R Street's Cameron Smith also previously wrote about this markup, pointing out that it was in fact a stealth tax on booze: http://www.drinksreform.org/blog-1/2017/5/16/will-alabama-gov-kay-ivey-un-bentley-the-abcs-liquor-tax-hike

America's Knocking Back Its Liquor Laws, Slowly

R Street's Jarrett Dieterle was cited in an article by Erin Clark of Real Clear Investigations on how America's alcohol laws are slowly undergoing a wave of reform:

"When Nicole Mills threw an apartment-warming bash this April, shopping seemed a snap. Almost everything she needed – food, beer, chips and dip -- was within walking distance of her downtown Miami apartment.

Except for one thing: the booze. For that the 26-year-old Mills was forced into her car.

“After having a long day of work … it’s frustrating,” she said. “It added about an hour to my day, way more time to just get ready to have my friends over.”

More miles, more gas, more road rage just so she can make cocktails? Who wants that?

Fewer and fewer Americans, it seems clear... While the direction of reform has consistently pointed toward liberalization, it has a slightly different flavor in each state because of their particular history and culture...

Other liberalization efforts have chipped away, in some form, at the strict division of functions under the three-tier system.

Those lines between producer, distributor and retailer were first blurred in the 1970s as California wineries used the growing popularity of wine tourism to push for the ability to sell a souvenir bottle or allow tastings during tours, said Jarrett Dieterle, a policy expert at the R Street Institute, a free market think tank. The subsequent rise of brewpubs, and most recently craft distillers and breweries, continued the trend..."

The entire article is well worth a read: http://www.realclearinvestigations.com/articles/2017/06/12/america_is_knocking_back_its_liquor_laws_slowly.html

 

Uncorking Economic Opportunity in Minnesota and Beyond

The Institute for Justice recently filed a lawsuit challenging Minnesota's restrictions on in-state wineries using out-of-state grapes for their wines. IJ's Meagan Forbes explains:

"The U.S. Constitution guarantees free trade among the states, and free trade has been a hallmark of American economic freedom ever since our nation’s founding. Now—more than 200 years later—Minnesota is violating this founding ideal at the expense of local farm wineries by limiting the grapes from other states that Minnesota winemakers can use to make their wines.

I know what you are thinking: wine from Minnesota? How? Most drinkable wines are made from grapes that struggle in the state’s extremely cold and harsh climate. Winemaking grapes grown in the region are a recent and promising phenomenon but they are often too acidic for most wine drinkers. So to make delicious wines, winemakers blend Minnesota-grown grapes with grapes grown elsewhere to create an essentially Minnesotan wine that is also drinkable.

Unfortunately, after opening their wineries, winemakers face a major obstacle to growth: The state bans farm wineries from making their wine with a majority of grapes grown outside Minnesota. This restriction forces farm wineries to buy a majority of their grapes from Minnesota growers, even when these grapes do not suit their winemaking needs. This trade restriction therefore prevents farm wineries from expanding their offerings to the broad variety of wines that their customers want. The law does not apply to the state’s thriving craft breweries that use hops grown in the Pacific Northwest, where the climate is much more suitable than the Upper Midwest. In other words, breweries can decide what is best for their customers, but farm wineries cannot..."

Read the rest here: http://ij.org/ll/june-2017-volume-26-issue-3/uncorking-economic-opportunity-minnesota-beyond/

This is yet another example of using economic liberty litigation to reform protectionist alcohol laws. R Street's Jarrett Dieterle recently authored a policy study on this potential trend: http://www.drinksreform.org/blog-1/2017/6/13/new-alcohol-policy-study-could-economic-liberty-litigation-free-the-booze

Indiana Doubles Down on Warm Beer

R Street's Jarrett Dieterle writes about Indiana's whacky "cold beer law" in his monthly column for The American Conservative. The Hoosier State prevents gas stations and grocery stores from selling that Great American Elixir known as an ice-cold six pack:

Indiana lawmakers recently announced that they plan to study the state’s outdated alcohol laws this summer with an eye toward reforming them for the 21st century. While this is an encouraging sign, the road that led to this legislative soul-searching involved a missed opportunity to reform the state’s infamous “cold beer law” and underscored the cronyist forces Indiana reformers are up against.

Although nearly every state has outdated and arcane alcohol laws, Indiana’s cold beer law stands out as one of the most bizarre. In its present form, state law allows only liquor stores and restaurants to sell carryout beer that is either “iced or cooled.” Gas stations and corner convenience stores are relegated to selling room temperature brews. Like many antiquated state alcohol laws, this rule grew out of the aftermath of Prohibition. After the 21st Amendment repealed Prohibition, Indiana passed the 1935 Liquor Control Act, establishing various types of retail licenses for alcohol. These classifications evolved over time to create a distinction between retailers who could sell cold beer and those who could not.

The convenience store chain Ricker’s appeared to find a loophole in the law last year by obtaining restaurant permits for two of its stores after they also started selling reheated burritos and installed seating for diners. With these restaurant permits in-hand, the stores began selling refrigerated beer.

Rather than viewing this development as a sign of a woefully outdated law, Indiana lawmakers were up in arms.

Read the whole column here: http://www.theamericanconservative.com/articles/indiana-doubles-down-on-warm-beer/

DrinksReform.org has previously covered the debates surrounding Indiana's cold beer law here and here.

Import Duties on Aluminum Could Make Your Beer More Expensive

Slapping tariffs on aluminum imports could make beer more expensive, writes Joe Deaux over at Bloomberg Markets:

"Donald Trump’s efforts to save American metal-making jobs by punishing cheap imports may come with an bitter side effect: pricier beer. 

That’s the view of Tim Weiner, senior commodity risk manager at Molson Coors Brewing Co. and its MillerCoors LLC unit. 'If there are duties on aluminum coming to this country, it will obviously get passed on to us and the customer,' he told an industry conference in Chicago Wednesday. 'Our prices will go up.'

The brewer’s warning juxtaposes the enthusiasm of producer Century Aluminum Co. at the prospect U.S. authorities will take action against unfairly priced imports. Following a World Trade Organization complaint filed by the Obama administration in January, Trump signed an executive memorandum in April initiating an investigation into aluminum imports as part of a push to bring back jobs to America’s rust belt.

But if the U.S. does impose import duties on primary aluminum, it will affect the roughly 5,000 brewers scattered across every congressional district, Weiner said. Asked about the likelihood of such duties, he said: 'It depends on whether it’s politically motivated, or business motivated. I think there’s political motivation for putting some tariffs on.'

About 60 percent of the brewer’s packaging is aluminum can, 'and we don’t expect that to change,' Weiner said. 'We’re giving our customers what they want, and what they want is cans.'..."

Read more at: https://www.bloomberg.com/news/articles/2017-06-07/beer-drinkers-beware-if-trump-taxes-metal-for-cans-millercoors

Kansas Legislature Considers Alcohol Tax Increase

Facing a state budget shortfall, the beverage industry in Kansas remains leery that state politicians will turn to them for additional revenue. Madison Coker reports at The Gardener News:

"As Kansas lawmakers continue to struggle with balancing the budget, a tax increase for alcohol might still be in play.

Facing a projected budget shortfalls of nearly $900 million through June 2018, Gov. Sam Brownback proposed a budget plan in January that included a 100 percent liquor sale tax increase, doubling it from 8 to 16 percent. While that budget was not approved, people involved in liquor sales are worried their industry could take a major hit if the budget crisis comes down to the last minute.

Executive Director of the Kansas Beer Wholesalers Association Jason Watkins said while most see a huge alcohol tax unlikely, legislators have not completely tabled the idea. 'We want to make sure we are there when they get to eleventh hour, they do not turn to alcohol taxes to find those extra dollars,' Watkins said.

Watkins is a creator of Ax the Tax, a campaign to advocate against the potential alcohol tax. Supporters of the movement include restaurants, bars and liquor stores across the state..."

Read more here: http://gardnernews.com/kansas-legislature-considers-possible-alcohol-tax-increase/ 

New Alcohol Policy Study: Could economic liberty litigation ‘free the booze?’

R Street's Jarrett Dieterle has published a white paper focusing on a recent court case out of South Carolina that could have major implications for the world of booze:

The South Carolina Supreme Court recently struck down a state law limiting how many liquor retail outlets an individual or business could own within the Palmetto State.1 According to the court, the only justification for the law was economic protectionism, an improper basis for economic regulation. The case may be a portent for the end of oppressive and protectionist alcohol-regulation regimes across the country, and a sign that the recent revival in economic liberty jurisprudence could be coming to the world of booze.

Check out the full paper here: http://www.rstreet.org/wp-content/uploads/2017/06/98.pdf

Jarrett previously coauthored an op-ed in the Charleston Post & Courier about the case, as well: http://www.drinksreform.org/blog-1/2017/4/21/let-all-sc-liquor-stores-compete-on-the-same-level

Politics' Push And Pull On The Alcohol Industry

Elizabeth Balboa of Byzinga wrote an interesting piece looking into the partisan breakdown of alcohol politics. As she reports, booze policy -- both reform efforts and resistance to reforms -- often blurs party lines:

We know that the fate of some industries better aligns with one political party over others. We’d never expect cannabis growers to vote Republican, and, at least last election cycle, private prisons were disincentivized to vote Democrat.

But beer, wine and liquor producers seem less resolute.

Having contributed $2,765,142 to Democrats (44 percent) and $3,586,830 (56 percent) to Republicans in 2016 PAC contributions, according to Open Secrets data, it seems the sector’s constituent companies can’t decide which party serves their communal interest.

The issue is, in part, the state-by-state, county-by-county, city-by-city variability in alcohol laws...

The whole article is very much worth reading: https://www.benzinga.com/news/17/06/9558471/politics-push-and-pull-on-the-alcohol-industry#/null

Federal Court Dismisses Anti-Trust Challenge To Connecticut's Liquor Pricing Law

An interesting court case out of Connecticut arose when alcohol retailer Total Wine & More brought a lawsuit arguing that the state's minimum pricing law ran afoul federal antitrust princples. Although the lawsuit was dismissed at the district court level, the interplay between antitrust law and the world of booze could be an interesting trend to monitor moving forward:

"A federal court on Tuesday dismissed an effort that would have lowered prices and increased competition in the Connecticut liquor market by overturning the outdated state system under which manufacturers, wholesalers and retailers combine to establish minimum prices.

In dismissing a suit by retailer Total Wine & More, Chief U.S. District Judge Janet C. Hall said the state laws and regulations establishing the complex, Connecticut pricing system cannot be preempted by federal anti-trust law that prohibits activities restricting interstate commerce and competition in the marketplace.

The Connecticut system establishes a floor for liquor prices that, for the most part, retailers cannot go below.

Hall's decision said that she was effectively bound by applicable federal law in Connecticut to uphold a liquor pricing system that legal experts have said was designed years ago to discourage the consumption of alcoholic beverages by Connecticut residents.

Total Wine argued repeatedly in its litigation that the Connecticut pricing system is unfair to consumers and to retailers trying to reduce prices in order to obtain a bigger share of a competitive market..."

Read the rest here: http://www.courant.com/breaking-news/hc-total-wine-lawsuit-dismissed-0607-20170606-story.html