Liquor Liberty On Tap Again

Pennsylvania voters have consistently said they want more convenience and choice by privatizing liquor sales. Not only would privatizing the state-run liquor store monopoly grant voters their wish, but it would also improve the state’s finances.

The good news for consumers and taxpayers? Pennsylvania House Majority Leader Dave Reed announced the House would vote on a liquor privatization plan before the end of February. The House previously passed a privatization proposal in March 2013.

Some critics of the plan have wondered how the state will replace the “profit” that the government monopoly liquor stores bring in. But here are some facts:

1) Almost 85 percent of the revenue the PLCB brings into the state each year is from taxes on alcohol. Those would remain.

2) Everything the PLCB takes in beyond its costs and taxes is in markup—essentially overcharging consumers. As a government monopoly, this isn’t a profit so much as an implicit tax. And what supporters of “modernization” really want is for the PLCB to bring in more money by charging consumers higher prices with their monopoly.

3) Under privatization, the state would actually take in more net annual revenue through taxes and license fees, according to a PFM group analysis. This is in addition to $1 to $2 billion in upfront revenue from privatization. The chart below details the numbers.

PLCB Annual Revenue and Expenditures (in thousands of dollars)
LCB Program Revenue Current (2014) Privatization
LCB Markup $556,000 $0
License Fees and Fines $13,000 $138,250
Misc Income $3,000 $0
Retail Regulatory Fee $0 $20,000
Total Program Revenue $572,000 $158,250
LCB Operations $438,000 $35,000
State Police Enforcement $22,000 $27,000
Treatment and Prevention $2,000 $3,520
General Fund Transfer $80,000 $80,000
Total Expenses $542,000 $145,520
Net Revenue $30,000 $12,730
Johnstown Flood Tax $323,000 $335,000
State Sales tax $127,000 $132,000
Corporate Income Tax $0 $1,900
Personal Income Tax (on S-Corps) $0 $500
Total Taxes $450,000 $469,400
Total Revenue for General Fund, State Police, and Treatment $584,000 $592,650
Liquor Modernization Analysis Based on Governor Corbett’s 2013 Proposal, Pennsylvania Office of the Budget, Conducted by the PFM Group, January 2013,