Pennsylvania's Booze Reforms Prove Popular

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Last year, Pennsylvania implemented modest changes to its alcohol laws, expanding the types of stores that can sell beer and wine. According to PennLive, the changes have proved to be quite popular among residents of the Keystone State:

"Pennsylvania last year entered what was, for the natives, a brave new world of alcohol sales.

Now on the cusp of the biggest alcohol sales weeks of the year, by several barometers it appears that long-stalled plunge into a more convenience-oriented market is working out. So far.

More than 550 businesses have received expanded wine permits since summer 2016, enabling them to sell bottles of wine or six-packs of beer, often in "general store" type atmospheres....

Beer and wine drinkers, meanwhile, still seem to be enjoying the novelty of wandering into a section of their favorite grocer and browsing through the aisles to create their own six-pack or even sidling up to the beer and getting a beer on draft.

'I love the convenience,' said Leslie Davis, a 48-year-old Middlesex Township resident reached at the Giant Foods store in Hampden Township this week.

'Because I'm already at the grocery store, and I don't have to go over to the liquor store to get it [a bottle of wine]. And the prices are basically the same,' Davis said, adding with a wry smile, 'I've checked.'..."

Read the rest here.

 

Checking in on Washington State 5 Years After Privatization

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Washington State privatized its liquor system in 2011 (the law took effect in 2012), and The Spokesman-Review recently published a piece investigating how the Evergreen State's booze market is faring 5 years later. According to the article, alcohol sales are up--likely due to much larger selection and more outlets selling booze--while prices have risen slightly as well. The price increase, however, may be due in part to Washington still having the highest distilled spirits tax in the entire country (according to the Tax Foundation). From the Spokesman-Review:

"Cross-border sales are one lasting effect of the privatization of liquor sales in Washington. More than six years after voters passed Initiative 1183, forcing the government to relinquish its Prohibition-era monopoly on sales of spirits, many continue to feel pinched by higher prices – and some still look for deals out of state.

Yet sales in Washington have been climbing, too. As backers of the initiative promised – notably Costco, which shelled out a record-breaking $22 million in support of the measure – there are more places than ever to buy liquor in the Evergreen State.

Privatization has enabled many distributors and retailers, such as California-based BevMo! and Maryland-based Total Wine & More, to capture significant shares of the Washington market, and top brands can be found on the shelves at any grocery store...

In fiscal 2017, Washington’s liquor taxes and fees added up to $31.48 per gallon, down from a peak of $35.22 per gallon three years prior, according to the Tax Foundation. In a distant second place this year was Oregon, where the liquor market is still tightly controlled, with a tax rate of $22.78 per gallon. Idaho, which also maintains a government monopoly, taxed $10.98 per gallon.

The high tax rate has resulted in a windfall for Washington’s government..."

Read the whole article here.

Repeal of Michigan's Half-Mile Reform Clears Senate, Heads to House

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Michigan liquor regulators recently repealed the state's protectionist half-mile rule that prohibited any liquor store from operating within a half-mile of another liquor store. The state legislature, in response to outcry from incumbent liquor store owners, is now taking steps to overrule this reform effort:

"The Michigan Senate on Wednesday approved legislation that would continue to prohibit liquor stores from operating within a half-mile of each other, defying efforts by state bureaucrats to scrap a longstanding proximity rule.

The 27-9 vote came hours after dozens of furious liquor store owners flooded a legislative hearing at the Michigan Capitol, protesting a pending rule change they claimed could kill their small businesses by allowing competitors to sell liquor next door.

In a battle that has been brewing for months, the Michigan Liquor Control Commission is attempting to strike a 1978 rule limiting liquor stores from operating within 2,640 feet of one another. The commission argues the rule is “protectionist” and anti-competitive.

The Senate legislation would thwart those plans by writing the so-called half-mile rule into law. It would also create exemptions allowing larger retailers and grocery stores to get around the rules..."

Read more here.

Could New Lawsuits Free Interstate Wine Shipments?

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There's hope for those who are depressed about the recent crackdown on interstate wine shipments. According to Wine-Searcher, lawsuits have been filed in several states to challenge these restrictive laws:

"Here's some good news for wine lovers in middle America: lawsuits have been filed in three states that could allow wine lovers to order wines from any state. And not just by any law firm – it's the same lawyers who opened up the country to direct shipping from wineries.

Currently residents of only 13 states and the District of Columbia can legally order wine online from an out-of-state retail store. This is a big contrast to ordering from a winery: residents of 42 states can order wine from out-of-state wineries.

Three of the largest states that don't allow interstate wine shipments from retailers are Illinois, Michigan and Missouri. Two Indianapolis-based attorneys, Bob Epstein and Alex Tanford, have filed suits in each of these states challenging the laws. They're looking at filing lawsuits in other states as well, and they hope eventually the US Supreme Court will rule on the issue – which would have an impact nationwide...

Epstein and Tanford were attorneys behind the landmark 2005 US Supreme Court case Granholm v. Heald. In that case, the states of Michigan and Florida had laws that allowed local wineries to ship wine to state residents, but not out-of-state residents. By a 5-4 decision, the Supreme Court ruled that those laws violated the commerce clause of the US constitution by favoring one state's products over another.

Many states immediately changed their laws to allow out-of-state wineries to ship to their residents. But it wasn't clear whether the Granholm decision should apply to retailers, and with the ruling expressly calling the three-tier system 'unquestionably legitimate', states have been much slower to address differential treatment of retailers..."

Read the whole article here.

Report: Michigan Wine Lovers Have No Access to 89% of Wines

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As the growing crackdown on interstate wine shipments continues, the National Association of Wine Retailers has released an estimate that Michigan residents are barred from receiving nearly 90% of the wines available on the market today because of state restrictions:

"The increase in interstate wine shipment by wine retailers and wine stores over the past decade can be traced directly to 3 developments in the American economy:

1. A significant increase in the number and diversity of domestic and imported wine products in the U.S. marketplace

2. Increased access to information about these new and diverse wine products

3. New logistics and delivery technology allowing efficient delivery of wine products.

Yet while these developments increase the demand for interstate shipment of wine, they also throw into sharp relief the deficiencies of the now archaic wine distribution systems and laws still in effect in many states. Consumers realize they now have less access to the true American wine marketplace.

The state of Michigan is a perfect example of this phenomenon. Between January 1, 2014 and October 27, 2017, the Federal Tax and Trade Bureau —the federal agency that must approve wines for sale in the United States before they are sold—approved 405,513 wines for the American marketplace. Yet during that same time, the state of Michigan approved only 44,233 wines for sale in that state. This is barely 11% of the wines available nationwide. Put another way, 89% of wines available in the American marketplace are unavailable in Michigan..."

Read more here.

 

It's a Federal Crime to Sell Booze Secondhand

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Spirits writer Chuck Cowdery continues writing about the absence of a legalized secondary booze market in the U.S., including pointing to the particular federal regulation making it illegal:

"There is, on the internet, a very active secondary market in rare bourbons and other alcoholic beverages. People offer bottles for sale or indicate bottles they would like to buy. Transactions are arranged by email or other private messaging. This happens on Facebook and Craigslist, and probably many other places. I’m not going to point you to any of them. They aren’t hard to find.

Unfortunately, in the United States the secondary market in alcoholic beverages is illegal. I’ve written about this before, as recently as October.

It is illegal to sell alcohol if you don’t have a license to sell alcohol. It is against Federal law and it is against state law in every state.

There has been some question, at least in my mind, as to whether, in a given transaction, both buyer and seller are in legal jeopardy. Clearly the seller is in violation, but is the buyer? I couldn’t point to a law that said the buyer was in trouble too. Now I can.

At the Federal level, laws regulating alcoholic beverages can be found in Title 27 of the Code of Federal Regulations. I’ve spent a lot of time in the early parts of Title 27, Chapter I, Subchapter A, especially Part 5, which gets into the labeling and advertising of distilled spirits, but I never made it down to Part 31, which regulates alcohol beverage dealers. There we find a section (27 CFR 31.141) titled “Unlawful purchases of distilled spirits.” It says that it is “unlawful for any dealer to purchase distilled spirits for resale from any person other than” a licensed dealer..."

The whole piece is worth reading. R Street's Kevin Kosar has previously called for legalizing the secondary alcohol market in the U.S. 

Baylen Linnekin on Repeal Day and the Future of Alcohol Regulations

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Food policy expert Baylen Linnekin dedicated his latest Reason.com column to the anniversary of Prohibition being repealed, as well as the burdensome booze regs alcohol producers still endure:

"Next week will mark the 84th anniversary of the ratification of the Twenty-First Amendment, which repealed alcohol Prohibition. The repeal of Prohibition is worth celebrating, even if the amendment was (and remains) a deeply flawed vehicle.

The chief flaw with the Amendment is, as I wrote earlier this year, that it "simply shifted much of the power to prohibit and incessantly regulate alcohol from the federal government to the states."

States have truly made the most of their teetotalitarian authority for decades, to the detriment of both alcohol producers and—much more so—consumers.

Much of the negative impacts of states' approach to alcohol regulation can be tied to what's known as the three-tier system, a Prohibition relic under which states generally prohibit direct alcohol sales from a brewer, vintner, or distiller to a consumer. The three-tier system mandates these alcohol producers first sell to a distributor or retailer—a mandatory middleman—who can then sell to actual drinkers..."

Read the whole column here. R Street's Jarrett Dieterle also interviewed Baylen Linnekin earlier this year about drinks laws and regs (here).

Indiana's Warm Beer Law Survives Again

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We've been monitoring the latest efforts to reform Indiana's alcohol laws--particularly the state's infamous warm beer law and its strict prohibition on Sunday booze sales. A state legislative commission recently passed a recommendation to allow Sunday sales, but a vote on whether to recommend allowing gas stations and grocery stores the ability to sell cold beer failed by the narrowest of margins:

"The prospect of getting a cold six-pack at your local grocery store has once again fallen flat.

After a nail-biter vote, a panel working to revise Indiana’s alcohol laws will not recommend allowing pharmacies, grocers and convenience stores to sell cold beer — something that has long been the well-protected province of liquor stores. 

The recommendation failed even though the vote was 8-7 in favor. That's because 9 of the 17 members had to vote in favor of the recommendation for it to pass. Two members — Gina-Gail Fletcher and Alex Huskey — were absent. 

The tight vote was even more dramatic because one member — Judge William Boklund — switched his vote in the middle of the roll call, joining proponents of cold beer access.

The result was a big blow for consumers who want to be allowed to buy cold beer for carryout at convenience, grocery and drug stores. Right now, only liquor stores are permitted to sell cold beer for carryout in Indiana, with few exceptions...."

Read the rest here.

Following the Money in Maryland Beer Politics

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Maryland has been at the forefront of beer reform news given its passage of the controversial HB 1283 beer bill last year (which was criticized by many craft brewers), as well as a newly-proposed reform package that would substantially liberalize the state's beer laws. Many reform advocates are cautious about the new bill's chances of passage, however, given past experiences of stalled reform efforts in the state. Liz Murphy of Naptown Pint has been extensively covering the Maryland beer and politics scene, and her latest article traces the money in Maryland beer politics--particularly for the key state legislators who seem most resistant to reforming the state's beer laws:

"There is one question I got asked following last year’s legislative embarrassment around House Bill 1283 more often than anything else — either packaged directly as such, or as an inquisitive or snarky aside:

What happens when you “follow the money” in Maryland politics and the brewing industry?

It’s a topic I’ve researched periodically, but it’s always been one I’ve approached with an overabundance of caution...

As I mentioned at the start of this, campaign contributions can be a tricky topic, because the “why” behind a contribution is not explained in these records — only the fact that these contributions exist.

That said, the presence of these contributions makes it difficult to take the claims of above-board legislative dealings at face value.

Because while Maryland brewers have recently formed their own PAC to begin contributing to candidates that support their cause, at the time events surrounding HB 1283 began to unfold, Maryland brewers seem to [be] the only party not donating any money.

Yet they somehow are also the only ones being targeted with punitive legislation, as well as combative posturing and demeaning comparisons to children."

The entire article is well worth a read.

Does Cutting Alcohol Taxes Cost Lives?

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The current tax reform plan working its way through Congress includes cuts to alcohol excise taxes, which in turn has reignited the debate over whether slicing such taxes is dangerous for public health. Publications like Vox and the Washington Post have recently published articles arguing that reducing booze taxes would lead to more alcohol-related deaths, while organizations like the National Taxpayers Union have pushed back against this claim. The Post cited one source who predicted 3,100 more people would die over a 2-year period from the proposed alcohol taxes cuts:

"Record numbers of Americans are drinking themselves to death each year, in part because booze is now cheaper than it's been at any point in the past half century.

Historically low federal taxes on alcohol are partly responsible for this trend. In 1951, the federal excise tax on a standard shot of 80-proof whiskey was about 90 cents in today's dollars. Today that number is closer to 13 cents, and falling every year because of inflation.

For years, experts have been calling on Congress to raise the alcohol tax on public health grounds. “Higher alcohol taxes save lives,” as Duke University's Philip Cook summed it up in 2015. But the lawmakers behind the Senate's tax bill have decided instead to lower it even further.

Those cuts 'will lead to more drinking and thus more alcohol-related deaths and violence,' according to the Brookings Institution's Adam Looney..."

The National Taxpayers Union called the Post's article the "most outrageous story to date," since, among other things, it doesn't sufficiently take into account the elasticity of demand for alcohol and consumers' responses to price changes:

"As demonstrated by this meta-analysis of 182 studies on the subject, the article fails to properly address the elasticity of demand (how the change in price will change demand). Individuals who are most likely to die from alcohol-related health problems tend to be abusers of alcohol. Research shows these individuals have an inelastic demand (meaning a change in price will only slightly affect demand) and will continue to drink no matter how high or low the price of alcohol becomes. As the meta-analysis states, “While many moderate drinkers probably respond to changes in prices of most alcohol beverages, it does not follow that an across-the-board price or taxation policy will directly reduce heavy drinking.” Because of this, higher taxes are an ineffective approach to trying to stop alcohol abuse..."