News

Minnesota Benefitting from Sunday Sales

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Last year, Minnesota allowed Sunday alcohol sales. After a year, evidence suggests that this has been a beneficial move. While some businesses have seen this impact more than others, this is a sign of consumers choosing their product as opposed to harming the economy. Some people that were formerly opposed to allowing Sunday sales are now eating their words:

One year ago, on July 1, Sunday liquor store sales became legal in Minnesota for the first time. Although there are no definitive figures available to determine the economic impact on state liquor tax revenue and liquor store operations, there is some evidence it's been a positive move.

"It's not too soon to eat my words from last year," said Edina City Manager Scott Neal, who oversees operations at the city's three municipal liquor stores.

Last year he was among the majority of liquor store operators who thought Sunday liquor sales would be a money-losing proposition. Instead, he estimates gross sales are up about $240,000, with about $50,000 of that being profit.

Read the whole article here.

Pennsylvania May Be Backing Off Plans to Borrow Against State Liquor Profits

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During recent budget debates in Pennsylvania, Gov. Tom Wolf floated the idea of using profits derived from the state's Liquor Control Board as security for a state loan (previously covered here). This novel use of state liquor proceeds raised eyebrows--and sparked a lawsuit--but it appears, for now, that the governor will not pursue the idea after all. Law360.com reports:

"A Pennsylvania advocacy group withdrew Tuesday its bid for a preliminary injunction to stop the governor from borrowing $1.25 billion against the state Liquor Control Board's future earnings to balance the state budget amid reports he was backing off the proposal...

That's because Wolf on Monday signed into law a budget deal approved by the General Assembly that instead borrows $1.5 billion from the state's tobacco settlement fund to pay for the $31.38 billion spending plan approved in June..."

More here.

R Street's Jarrett Dieterle recently wrote about the PLCB and how its liquor markups function like taxes.

 

NYC's Subway and Buses Ban Alcohol Advertising

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New York City's Metropolitan Transportation Authority has decided to ban all alcohol ads in subways and buses around the city, as reported by the New York Times and others:

The board of the Metropolitan Transportation Authority on Wednesday banned advertising of alcoholic beverages on New York City buses, subway cars and stations, contending that the social benefits of deterring underage drinking outweighed the loss of revenue.

After years of pressure from grass-roots organizations, the board voted unanimously in favor of the ban, which will go into effect in January...

Effective immediately, the agency will no longer accept new alcohol-related ads; existing contracts for such ads will be honored until the contracts expire at the end of the year...

Read more here. As an article in AdAge notes, this goes against recent decisions by other cities around the country to repeal alcohol advertising bans in their public transit systems:

Several big-city transit agencies already ban alcohol transit ads, including Los Angeles, San Francisco, Detroit, Seattle, San Diego, and Baltimore, the MTA said.

The Distilled Spirits Council, a trade group representing liquor brands, cited other cities such as Chicago, Charlotte and Washington D.C. that "have recently overturned bans on alcohol advertising on public transit with each city experiencing absolutely no negative effects." The Chicago Transit Authority reversed its ban in 2012 but kept some restrictions in place. Brands cannot advertise on buses, for instance, and alcohol ads cannot "exceed 9.99% of the total advertising space on the transit system at any one time."

Washington D.C.'s transit system overturned its alcohol ad ban in late 2015, ending a 20-year-old prohibition.

More here

[R Street's Kevin Kosar has previously written about "The Strange War on Alcohol Advertising."]

County-Owned Liquor Stores in Maryland Were Given Extra Discounts

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Maryland's alcohol regulation system devolves significant power to individual counties, which creates a patchwork of booze regulations across the Old Line State. In Montgomery County, for example, the county government controls all spirit sales. According to Bethesda Magazine, state liquor regulators recently uncovered evidence that Montgomery County was obtaining discounts from producers beyond what other private wholesalers in the state were being offered, which is a violation of state law:

Less than four months after putting in place a new pricing model, Montgomery County’s Department of Liquor Control (DLC) is redoing its prices again in response to a warning from the state comptroller’s office.

Jeffrey Kelly, the chief of the comptroller’s Field Enforcement Division, which regulates the alcohol industry in the state, sent the DLC a bulletin Sept. 12. The bulletin notified the county agency that it might be getting discounts from alcohol producers and suppliers that other distributors in the state aren’t receiving—a violation of state law.

The DLC controls the wholesale distribution of all alcohol and retail sale of liquor in the county—a unique arrangement in the state. Other jurisdictions’ alcohol sales are served by traditional privately run distributors, rather than a county agency. The DLC generates about $30 million in profit for the county that is used to pay off infrastructure bonds and supplement the general fund...

Read the rest here.

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.