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It's time to allow booze at SEC college football games

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Beer and other alcohol is ubiquitous at professional sports stadiums around the country, but less so at the college level. R Street's Marc Hyden argues that the SEC should allow booze inside its stadiums on gameday--and how doing so would ultimately be a win-win on policy grounds:

According to the old maxim, “In the South, college football isn’t just a sport. It’s a religion.” Indeed, there are few things more hallowed than Southeastern Conference (SEC) football on Saturdays and church on Sundays. In fact, Sundays in the Bible Belt were once treated the same as many of today’s college athletic stadiums, where there is a strict prohibition of general alcohol sales.

And while this issue once spanned college sports across the country, the National Collegiate Athletic Association (NCAA) has gradually loosened its restrictions. Now it appears poised to relax them even further by allowing general alcohol sales at championship events. Yet rather than following the NCAA’s lead, SEC leadership has stood firmly opposed to the liberalization of alcohol policies, leaving its 14 schools with mostly “dry” stadiums. The SEC should reverse this blanket prohibition and leave the decision up to the local authorities...

Read the rest here.

Pennsylvania might improve its dreadful drinks laws—a little

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Pennsylvania's legislature is set to consider a bill that would roll back the state's recently-implemented flexible-pricing scheme for alcohol. R Street's Jarrett Dieterle has written before about how booze markups in control states function analogously to a stealth tax, and now R Street's Kevin Kosar weighs in on Pennsylvania's specific situation in an op-ed for the American Spectator:

If Rep. Jesse Topper has his way, Pennsylvania’s legislature will roll back its infamous stealth tax on drinks. Topper, a Republican representing the south-central Bedford, Franklin, and Mercer counties, has introduced H.R. 2263, which would repeal the “flexible pricing” authority given to the Pennsylvania Liquor Control Board in 2016.

Why is this good news? Well, the cheerfully named provision had the dreadful effect of enabling the state liquor officials to raise prices as they saw fit. The PLCB has a monopoly on the sale of spirits and a near monopoly on wine sales, so it can set prices without fear of price competition. And with the state legislature demanding the PCLB give it big chunks of revenue each year to fund government employees’ pensions and the like, the problem is obvious: flexible pricing is a stealth tax. Bureaucrats raise revenues for general government spending by elevating mark-ups paid by drinks consumers, sans legislative enactment. It is literally taxation without representation...

Read the rest of Kosar's op-ed here.

 

R Street's Jarrett Dieterle Featured in Video About America's Craziest Drinks Laws

The Pacific Legal Foundation (PLF) recently announced that it had filed a lawsuit, on behalf of Chef Geoff Tracy, challenging Virginia's ban on happy hour advertising. Virginia's happy hour ban prohibits restaurants and bars in the commonwealth from advertising drink specials--even something as innocuous as "$3 beers from 4-7pm." Geoff Tracy owns a Virginia restaurant and is arguing that Virginia's advertising ban--something he doesn't have to put up with for his nearby Maryland and DC restaurants--violates the First Amendment. R Street's alcohol policy teamed up with PLF to host a launch party for the case, and R Street's Jarrett Dieterle appeared alongside PLF attorney Anastasia Boden in a video highlighting the many ridiculous alcohol laws in America:

Virginia lawmakers have (yet another) opportunity to fix state's backwards booze laws

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Virginia's antiquated distilling laws are a topic of frequent conversation around these parts, and R Street's Jarrett Dieterle has written about Virginia numerous times (see here and here, for example). The Virginia legislature now has its best opportunity in years to start reforming its backwards system, and Jarrett took to the pages of the Richmond Times-Dispatch to argue that it's far past time for state lawmakers to finally deliver:

"Virginia is one of 13 'control states' at the retail level, meaning that a government entity — in Virginia, the Department of Alcoholic Beverage Control (ABC) — is in charge of all sales of hard spirits in the state.

The Virginia ABC has become notorious for its outdated regulatory model, and any honest survey of the legal obstacles Virginia distillers face shows why.

Despite this oppressive legal regime, prior reform efforts have mostly failed to make it through the state legislature. Now, lawmakers in Richmond have their best opportunity in years to pass meaningful reform — if only they can find the courage to follow through...

ABC imposes a jaw-dropping 69 percent markup on every bottle of hard spirits sold in the state, in addition to the state’s 20 percent excise tax on liquor. When taxes and the state-imposed markup are added together, distilleries receive only 46 percent of the purchase price of every bottle of booze they sell. This gives Virginia the third-highest effective tax rate on hard spirits in the nation....

This session, the Virginia legislature has considered numerous reform bills that would overhaul the state’s backward booze system. While most failed to gain traction, at least one bill now has a shot at passage. SB 803, which would allow distilleries to keep the markup money from on-premise liquor sales, recently cleared the state Senate. The ball is now in the House of Delagates’ court to decide whether to take up the Senate legislation..."

Read the whole piece here.

How the Recent Federal Tax Reform Impacts Booze

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R Street's Kevin Kosar and Jarrett Dieterle have a new explainer out, detailing how the recent tax reform legislation reduces federal excise taxes for different types of alcohol. Although the new tax treatments vary, the impact will likely be significant:

This past December, Congress and President Donald Trump passed the “Tax Cuts and Jobs Act,” which significantly reduced federal taxes across the board. While the legislation’s impact on general corporations and individuals was the subject of substantial analysis, its overhaul of federal alcohol taxes has received much less attention.

However, the reform bill incorporated a version of the Craft Beverage Modernization and Tax Reform Act, which reduced federal excise taxes for all kinds of alcoholic beverages, from beer to distilled spirits and wine. This marks the first decrease in federal wine excise taxes in over 80 years,  and the first in distilled spirit excise taxes since the Civil War.

Estimates have predicted that the tax reduction will save the alcohol industry up to $4.2 billion over the next two years. While substantial, this tax savings may also prove transient, as the alcohol tax reductions are slated to expire in two years, on December 31, 2019. It’s also worth keeping in mind that alcohol producers remain subject to state-level excise taxes—which can vary significantly from state to state—as well as state-imposed markups in control states.

This R Sheet summarizes the various tax treatments that alcoholic beverages will receive as a result of the Tax Cuts and Jobs Act.

A link to the full explainer can be found here.

R Street's Kevin Kosar on the Anniversary of Prohibition Repeal

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December 5 was the anniversary of Prohibition ending in the United States, now celebrated as Repeal Day. To mark the occasion, R Street's Kevin Kosar recounted the history around the failed experiment in a column for the Washington Examiner:

"Plenty of hooey comes from the mouths of elected officials. Arguably, the prize for the nuttiest statement of all might go to the late Sen. Morris Sheppard, D-Texas. In 1930, he haughtily declared, "There's as much chance of repealing the 18th Amendment as there is for a hummingbird to fly to Mars with the Washington Monument tied to its tail."

Sheppard, who spent three decades in Congress, was an anything but an impartial observer. The Texas Democrat had sponsored the constitutional amendment to ban drink and fought successfully for the Volstead Act and other anti-hooch laws. He was often called the father of prohibition, although in truth, this ugly progeny had many parents. Nativists, feminists, evangelicals, captains of industry, and paternalistic progressives joined to form a crazy quilt coalition against drink.

For nearly 14 dark years (1920-1933), the production and sale of alcohol was largely banned..."

Read the rest here.

When the Whiskey Making Was Hard, But the Government Was Easy

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R Street's Jarrett Dieterle recently attended the 10th anniversary celebration of George Washington's rebuilt Mt. Vernon distillery. He wrote the following piece for Reason about whiskey making during Washington's time and how it was harder in every way except dealing with the government:

George Washington's rebuilt distillery at Mount Vernon recently celebrated its 10th anniversary with a team of master distillers from around the country producing a commemorative rye whiskey using the old-fashioned methods of Washington's time.

When Mount Vernon farm manager James Anderson pitched the idea of opening a whiskey distillery to Washington in 1797, it was hardly a novel idea. Many early Americans distilled alcohol and whiskey surpassed rum as the young nation's spirit of choice after the Revolutionary War.

Despite a somewhat saturated market, Washington quickly distinguished himself in the whiskey business—his distillery would become one of the largest in the country, producing 11,000 gallons during its peak years.

Washington's success should not obscure the fact that making whiskey at the turn of the 18th century was hard. Everything about the whiskey-making process—from milling the grain, to stirring the mash, to firing the stills—was an order of magnitude more difficult than today's mechanized and streamlined process...

Entrepreneur that he was, Washington would be awed by the technological advancements in distilling capitalism has created—advances that, ultimately, have resulted in the wonderfully consistent and smooth whiskeys we enjoy today.

His awe would surely turn to disgust if someone tried to explain to Washington the modern-day nightmare that is the Virginia Alcoholic Beverage Commission. For all of the hard work to produce liquor in his time, dealing with the government was easy...

Read the whole piece here (including a neat video on the distilling process at Mt. Vernon).

How the PLCB enacts stealth taxes on Pennsylvanians with price markups

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R Street's Jarrett Dieterle took to the pages of the Pittsburgh Post-Gazette to argue that the PLCB's liquor mark-up authority constitutes a form of stealth taxation power:

Pennsylvanians are used to buying their pinots and bourbons from state-run Fine Wine and Good Spirits stores, but most are probably unaware that the Keystone State is also using alcohol sales to enact stealth tax increases.

Like many so-called “control” states, the Pennsylvania Liquor Control Board sets the markup prices for the alcohol it sells to the public. The revenue derived from these markups is used to help fund the state government at-large, which means the markups are functionally analogous to taxes. This setup is problematic on many levels, and it’s far past time for Pennsylvania to reform it...

The connection between the PLCB’s markups and general government funding increasingly has become explicit. When the PLCB announced its recent price increases, an agency representative cited the rising costs of public pensions and unemployment benefits as the reason for the hikes. Gov. Tom Wolf even took it a step further by proposing that PLCB profits be used as security for state loans, further underscoring the relationship between the markups and government funding.

Defining what actually counts as a tax is important, since our democratic system of governance long has recognized that only elected representatives should able to enact taxes.

You can read the rest of the op-ed here. The op-ed was based on a larger policy report Dieterle wrote on the issue of control state liquor mark-ups (available here).

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.

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.