Op-Ed

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).

Pennsylvania Should Get Out of the Liquor Business

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As previously covered on DrinksReform.org, Pennsylvania's Liquor Control Commission recently let slip that it was planning to raise prices on 422 items in its state-run liquor stores. The Inquirer's editorial board took the state government to task over this decision and calls for privatizing the state's liquor business:

The Pennsylvania Liquor Control Board’s decision to raise prices this week on hundreds of brands of wines and spirits is just the latest reminder of the need for lawmakers to privatize the State Stores.

The Liquor (out of) Control Board refused to disclose which brands received the price increase. But the costs of more than 400 products were increased by at least $1. More than two dozen of those items were jacked up between $2 and $100.

The price hike comes a year after Gov. Wolf signed Act 39, the latest Harrisburg Band-Aid designed to move the state beyond the antiquated Prohibition-era liquor laws. One of the “reforms” included in the measure gave the Liquor Control Board the ability to implement more flexible (read: higher) pricing.

Previously, the LCB had to settle for marking up its liquor products by just 30 percent across the board. Under the new and not-so-improved measure, the LCB can increase prices as much as it wants...

Of course, there is a simple solution to the state’s exorbitant pricing: Pennsylvania should get out of the liquor business altogether. Selling liquor licenses to private retailers would generate hundreds of millions of dollars for state coffers. More important, allowing competition would result in lower prices, greater selection, and better service for consumers...

You can read the entire editorial here.

 

It's Time to Legalize Home Distilling

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R Street's Jarrett Dieterle takes to The Federalist to argue in favor of legalizing home distilling. He argues that doing so would simply place distilling on par with home brewing, which has been permitted since 1978 at the federal level:

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.

Treating home distilling as illegal makes little sense, given that homebrewing and wine making have been legal at the federal level since 1978, when President Jimmy Carter signed legislation allowing Americans to produce limited amounts of beer and wine for personal consumption. Nearly 40 years later, many beer industry analysts have argued that Carter’s home brewing reform was a key factor in the meteoric rise of the craft beer movement...

Read the whole article here.

Some U.S. States Are Cracking Down On Interstate Direct-To-Consumer Wine Shipping

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As previously covered on DrinksReform.org, shipping companies and states are becoming more aggressive in cracking down on direct-to-consumer wine shipments. Thomas Pellechia writes more about the crackdown in Forbes, and proposes a solution:

"[M]any states are cracking down on what they perceive as illegal alcohol shipping. New YorkMichigan, and Illinois are at the top of the aggressive stance; PennsylvaniaSouth Dakota, and Arizona, new to allowing alcohol shipping, are looking closely to see what goes on...

While most states allow DtC from out-of-state wineries, only a handful allow it from out-of-state wine retailers. Retailers trying to ship DtC in states that do not allow it may not be able to persuade a pressured carrier to accept the wine...

An idea: create a universal license for both fulfillment centers and carriers who want them and allow universal interstate wine shipping for both wineries and retailers. Problem solved!" 

The whole article is well worth a read.