Pennsylvania Mulls Privatizing Liquor Sales

Pennsylvania Mulls Privatizing Liquor Sales
August 15, 2011

Pennsylvania House Majority Leader Mike Turzai (R-Allegheny) is leading the charge to privatize the state’s liquor sales. Utah is the only other state that retains total control over both wholesale and retail liquor sales within its borders.

In Pennsylvania, this monopoly is the legacy of Gov. Gifford Pinchot, whose goal in the post-Prohibition world of 1933 was to make sales of alcohol “as inconvenient and expensive as possible.”

House Bill 11 would do away with the current state-run system in favor of 1,250 independent stores. This would be twice as many as exist currently in Pennsylvania.

‘A Core Government Function?’

“Should Pennsylvania be in the business of selling alcohol? Is this a core government function? I don’t think so, and the large majority of Pennsylvanians agree,” Turzai said in a statement. “The current system is antiquated and out of touch. It’s time to end the statewide monopoly and give consumers better selection and more convenience.”

Under the legislation, licenses would be sold on an open market by an independent third party. Recent polls conducted by Quinnipiac University show more than two-thirds of Pennsylvanians want to see this plan come to fruition.

Unreasonably high prices and poor customer service are not the only things about liquor sales that bother Pennsylvanians. Selection is also extremely limited under the prevailing program. This has been especially troublesome to wine enthusiasts.

Conflicting Interests

The Pennsylvania Liquor Control Board (PLCB) has conflicting interests—to both promote and regulate alcohol consumption. Under Turzai’s reformed system, the PLCB would be responsible only for regulation and other safety and health-minded operations.

Enforcement at state-run stores is minimal today, and there are few measures in place to protect teens or others who might abuse the substance, he says.

Earlier this year, Pennsylvania Independent reporter Eric Boehm noted in an article, “As part of their alcohol enforcement duties, state police use undercover operations involving minors attempting to purchase liquor from bars and restaurants. However, the same age compliance checks do  not apply to the 614 state-owned and operated liquor stores across the commonwealth. In fact, the state police say they do not engage those stores with any age compliance checks at all, trusting the employees to handle it.”

The proposed legislation would strengthen law enforcement’s hand in alcohol sales and prioritize alcohol safety and awareness efforts.

Opponents of the reforms, led by 3,500 unionized liquor store clerks, say the state would lose tax revenue and jobs.

$1.7 Billion Sales Estimate

Geoffrey Segal and Geoffrey Underwood of the Reason Foundation two years ago estimated Pennsylvania could raise $1.7 billion by selling its liquor stores. Nathan Benefield of the Pennsylvania-based Commonwealth Foundation estimated the commonwealth would continue to take in close to $350 million annually in alcohol sales tax.

The Liquor Control Board returned nearly $500 million to the Pennsylvania treasury this fiscal year.

However, the new system would involve restructuring taxes, in part by implementing a new gallonage  tax of $8 to $12 a gallon of liquor to help close this gap.

Elizabeth Henderson (ehenderson@heartland.org) is a legislative assistant for government relations at The Heartland Institute.