CF: Wholesale Privatization Key to Greater Selection, Lower Prices
Contact: John Bouder (717) 671-1901 | JBouder@commonwealthfoundation.org
As the Senate Law and Justice Committee concludes hearings on privatization of liquor sales, the Commonwealth Foundation has released the following fact sheet.
“Efforts in prior decades to privatize state liquor sales might make you think our state motto is ‘Pennsylvania: we’ve always done it this way,’” said Commonwealth Foundation’s Director of Policy Analysis Nathan Benefield. “But as lawmakers look to deliver greater choice and convenience for consumers, they should ensure Pennsylvania joins the majority of other states that allow private businesses to effectively and efficiently run the beverage industries’ wholesale operations.”
The Commonwealth Foundation identified several fallacies regarding wholesale privatization that lawmakers have heard in prior hearings and statements.
You may have heard that liquor privatization will cost the state $500 million in lost PLCB profits.
The truth is that approximately 80 percent of the “profits” the PLCB transfers to the state is generated from taxes that will remain. The rest of PLCB’s profits are taken out of the pockets of Pennsylvania consumers and taxpayers through “markup” charges.
Privately-owned liquor stores would generate the same revenue via additional taxes and licensing fees to the state. In addition, privatization would reduce border bleed that annually equals more than $180 million in lost sales, and more than $40 million in lost state tax revenue in just a handful of southeastern counties, according to the PLCB’s own analysis.
You may have heard that the PLCB wholesale monopoly works well.
However, the PLCB’s wholesale monopoly can’t serve current, much less expanded, retail outlets, restaurants and taverns. Rep. Kurt Masser (a tavern owner) explains the PLCB’s ordering process: “I get my meat delivered to my restaurant. I get my produce delivered to my restaurant. I get my beer delivered to my restaurant. I have to pick up my liquor order. I can’t get it delivered. And if the liquor order is wrong, I have to take it back to the store and redo it.” A competitive wholesale system will better serve Pennsylvania’s small businesses.
You may have heard that the PLCB’s wholesale function provides a better selection of products.
In fact, the PLCB’s wholesale monopoly over wine and spirits limits the selection available to consumers and keeps products out of Pennsylvania. A handful of employees at the PLCB have the power to determine if a product will be sold in our state.
Consider the example of the government-created wine brand wine, TableLeaf. The PLCB spent $7-10 million on copyrighting, branding and marketing a wine that unfairly competes against Pennsylvania wineries and other private businesses.
You may have heard that the Pennsylvania Liquor Control Board is among the largest buyers of liquor in the country with enormous “buying power” that keeps prices low.
That’s simply not true. A ranking of the largest private liquor wholesalers compared with the PLCB’s pre-tax purchase of wine and liquor from manufacturers shows the PLCB is only the 8th largest wholesaler in the U.S. Moreover, the PLCB is only about one-ninth the size of the largest U.S. wholesaler, Southern Wine and Spirits. The PLCB pales in comparison to the “economies of scale” that other private wholesale distributors could bring to Pennsylvania.
The supposed advantage of keeping a government monopoly over wholesale is based solely on misinformation. Rather, competition between private wholesalers within the state will keep prices down.
You may have heard that liquor privatization failed in Washington.
One year later, the Seattle Times reports liquor sales have increased, tax revenue has increased, drunk driving facilities are on the decline, and Washington has seen a net job gain after privatization. Prices have varied due to new fees and taxes, but overall liquor privatization is a huge improvement. Tim Sheldon, the Democratic President Pro Tempore of the Washington State Senate said of the old monopoly system, “It was a disaster,” noting how difficult it was for retail stores to get the inventory they needed.
Why is wholesale important?
- Currently, the PLCB oversees the ordering, shipping, and delivery of all purchased wine and spirits. Restaurants, bars, and hotels that are licensed to serve or sell drinks in Pennsylvania must purchase their liquor from the PLCB.
- PLCB officials determine what options these venues are able to choose from. If a wine or spirit is not on the list of registered brands, then it cannot be bought or sold in Pennsylvania.
- If the government maintains monopoly control of the wholesale side, the Pennsylvania Liquor Control Board will have complete power to make or break any retail stores that sell liquor.
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For more information, please contact John Bouder, Communications Officer at
717-671-1901 or firstname.lastname@example.org.
The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.