At happy hour tonight, I had a vodka martini. My liquor of choice? 1681 Penn vodka crafted by Philadelphia Distilling. Despite being distilled in the Commonwealth, 1681 Penn has only recently landed in state stores. In Pennsylvania, you can’t buy liquor outside of state stores. Or wine. Or have wine shipped to you.
While our state produces great beers from the likes of Victory, Yards, Sly Fox, Tröegs and the ubiquitous Yuengling, you can’t pick up a six-pack at the grocery or at the convenience store. You can only buy beer at stores that have been blessed by the Commonwealth which generally includes beer distributors and breweries.
Every now and again, my husband will pick up a Talisker on his travels. Or someone might bring us a Rhum Barbancourt. I always appreciate trying something a little different, a little outside of the norm. But here’s what I didn’t know when I sipped a little something purchased from outside of the Commonwealth: it turns out that I’m killing children.
Fortunately, I have United Food and Commercial Workers Local 1776 to thank for this realization. They are currently airing a $300,000 commercial warning the public about the dangers of privatization of the sale of alcohol.
Among the dangers? It puts our kids at risk, says Local 1776, who advises:
It only takes a little bit of greed to kill a child.
Prior to that commercial, I assumed that alcohol was alcohol. But apparently, alcohol purchased outside of the state-controlled system kills children. This is good to know.
I also assumed that the dollars spent inside the Commonwealth stayed inside the Commonwealth. But that, according to the ad, isn’t quite true. Apparently, unless the Pennsylvania Liquor Control Board (PLCB) controls the sale of alcohol, our tax dollars will be diverted elsewhere. You know, because capitalists are greedy. They will steal our tax dollars and kill our kids. That is what the ad is implying, right?
And what about that tax argument? The one that suggests that “politicians want [to] … lose the pot of money that saves tax dollars too?” The one that argues that tax dollars are maximized by state stores (PA Wine & Spirits)? The one that says that privatization would result in a loss of tax dollars to the Commonwealth?
Like the “you’ll kill our kids” argument, the loss of tax revenue argument is a scare tactic. You just have to look at the numbers.
Last year, state stores generated approximately $2.2 billion in sales. Of that, about a quarter, or $512 million, found its way back to our Treasury in the way of taxes and transfers to the General Fund. Those dollars break down like this:
- $311.24 million (61%) in liquor taxes;
- $121.09 million (24%) in sales tax; and
- $80 million (15%) transfer to the General Fund.
Of the dollars that don’t make it back to the Treasury, the breakdown includes:
- 56% – Purchase of Wine and Spirits
- 14% – Store, Warehouse, and Transportation Costs
- 4% – Administrative, Alcohol Education, Licensing & Legal
- 1% – Billings from other Commonwealth Agencies
- 1% – Contributions to Other Agencies
The majority of funds (74%) spent by state stores are on inventory, costs, and administration. In other words, the cost of doing business. Those are the same kinds of expenditures that would be made by a privately-owned liquor store.
As for those dollars returned to the Commonwealth? The reality is that a dollar spent on booze in the Commonwealth is subject to the same sales taxes (6% for most of the state, 7% for Allegheny County, and 8% in Philadelphia) no matter who is doing the selling. And those liquor taxes? Same deal.
Tax dollars are tax dollars. Third parties who collect certain taxes on behalf of consumers are responsible for remitting those dollars to the Commonwealth regardless of their identity (unless otherwise exempt, like certain non-profits).
Of the money returned to the Commonwealth, more than 80% is attributable directly to sales and liquor taxes: again, the same kinds of dollars that would be remitted by a privately owned liquor store. It might even be a little more. Because of its rather draconian liquor laws, Pennsylvania suffers from “border bleed” – that’s a term for consumers leaving the Commonwealth to buy liquor somewhere else, like New Jersey, Delaware, or Maryland. It’s estimated that the Commonwealth loses tens of millions of dollars of tax revenue each year because residents drive across the border to buy alcohol in other states.
A survey conducted for the PLCB showed that 45% of Philadelphians and surrounding counties buy some or all of their alcohol outside of Pennsylvania. I *might* have known some of these people. I *might* have consumed some of this alcohol. I feel comfortable saying that, anecdotally, those numbers sound about right.
All total, Pennsylvania consumers buy nearly a quarter of their wine and spirits from other states. The financial loss to the Commonwealth? An estimated $180 million in sales and more than $40 million in tax dollars. A study conducted by Public Financial Management, Inc. (PFM) at the request of the Pennsylvania Governor’s Budget Office found that privatizing the sale of alcohol would result in a return of about $100 million of those sales dollars to the Commonwealth.
Also worth considering? Currently, those employed by the PLCB (including the union running those ads) receive generous benefits from the Commonwealth, including a pension (I won’t even address the costs associated with investigating those pesky ethics violations). With privatization, those employment and benefit costs would no longer be paid by the Commonwealth. In short, we’d no longer be spending tax dollars to make tax dollars.
As for those kids? If you’re a regular reader of the blog, you know that I’m a mom. Keeping kids safe is something I’m pretty passionate about. But those actors playing moms on the playground in that ad? Their lines are as real as their stories. By the numbers, Pennsylvania ranks above the national average in alcohol-related deaths. We have a larger percentage of alcohol-related traffic fatalities than our lenient neighbor, New Jersey. Mothers Against Drunk Driving (MADD) ranks Pennsylvania 35th in DUI safety: the only border state with a worse ranking is Delaware.
When it comes to alcohol use for minors, we surpass the national average. Our minors also binge drink more than most of the country. And when they do drink? They don’t buy from state stores: less than 5% of minors who drink alcohol bought alcohol from a store. Most minors get their alcohol from friends and family.
This, all with our currently restrictive laws.
What do doctors have to say about those laws? Can we change behaviors by restricting sales to state stores? The former chair of the American Medical Association, Dr. Raymond Scalettar thinks not, saying about the attempt to regulate drinking by the Commonwealth: “Alcohol consumption habits tend to be culturally driven and macro-level control policies have little to do with drinking patterns.”
The reality is that the current control of the sales of alcohol by the Commonwealth doesn’t keep our children safer than private sales. And offering consumers more choice does not mean fewer tax dollars to the Commonwealth: it likely means more.
But let’s not confuse taxpayers with the facts. Let’s ask what people want. They want to save kids, right? And maximize tax dollars? Or, er, maybe they believe that’s a false choice. A poll published in fall 2013 indicates that 77% of weekly PLCB customers favor privatization (report downloads as a pdf). Nonetheless, lawmakers aren’t ready to get rid of the PLCB just yet: GOP Senate leaders are considering a bill to allow beer and wine to be sold in grocery and convenience stores but would make state stores the only place to buy spirits in the Commonwealth.
I realize that not everyone is on board with privatization (at least 23% of weekly PLCB customers want to keep the same system) and it’s not my mission to try and change anyone’s mind. But the idea that tax dollars will somehow disappear with privatization isn’t true and to attempt to muddy the waters on that point – while tossing in the fear that we’re also harming our children – is disingenuous. This is the kind of thing that makes citizens hate the process.
My advice? If you’re on the fence, read everything. Ask questions: your representatives should be able to give you straight answers.
Finally, don’t assume that picking up a nice Shiraz outside of the PLCB means that you’re killing both kids and the Pennsylvania economy. It’s simply not true.