Union: Privatizing The Sale Of Alcohol Will Kill Children, Lower Tax Revenue

At happy hour tonight, I had a vodka martini. My liquor of choice? 1681 Penn vodka crafted by Philadelphia Distilling. 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 appreciated 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 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 is 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.