Elmer Smith: Flood warning for Pa. & private liquor sales

Posted: July 15, 2011

JOHNSTOWN, Pa., would look like Manhattan on steroids by now if every dime from the Johnstown flood tax had gone to rebuilding it.

Instead, the "temporary" tax on liquor levied in the aftermath of the 1936 flood (not to be confused with the Johnstown floods of 1889 and 1977) is being channeled into the state's general fund to be spent at the discretion of our wise stewards in Harrisburg.

I know, you're thinking, "I don't remember getting the memo on this one."

Well, you didn't. This is one of those little stealth taxes that gets levied as a user fee, like the bridge tolls that the Delaware River Port Authority just raised to $5. If it had cost George Washington that much to cross the Delaware, we'd still be British.

So, no, nobody asked you. They didn't ask when the flood tax was first levied at 10 percent or when it was raised to 15 percent and then 18 percent. Because, unless they caught us pie-eyed, we would have said "no" to that tax.

Yet, we drink to it every time we toss back an adult beverage purchased in Pennsylvania. With the state's unlimited authority to raise this flood tax, there is no cap on our nightcaps.

That was almost enough to get me behind state Rep. Mike Turzai's latest attempt to end the state's monopoly on liquor sales. He would dismantle the state stores and auction off licenses to private operators.

Turzai, an Allegheny County Republican, would get us out of the wholesale-liquor business, eliminating the 30 percent markup that the state adds to the price of the liquor it buys for resale. He'd replace the flood tax and 30 percent markup with a tax of $3.50-$7 a gallon depending on alcohol content.

I read the Turzai proposal and still can't figure out if the gallonage fee would raise enough to replace the $220 million a year the flood tax brings in, or if the by-the-drink tax he proposes would replace the 6 percent tax that bars and restaurants pay on liquor.

But Turzai's math has always been optimistic. He claimed as recently as last year that an auction of licenses would yield a $2 billion windfall. In the current version, the number of licenses has had to be increased to reach that amount.

Still, it's hard to argue that the system couldn't be more efficient. Turzai says that the state averages only $90 million a year from store operations, not counting $376 million in tax revenue that the state could collect from private retailers and wholesalers.

Turzai is less convincing when he argues that enforcement would not suffer or that consumption would not rise. Turning sales over to people who have a vested interest in selling more would have to affect consumption, especially underage purchases.

But his biggest opponent is not the drinking public. It is Wendell Young, of the United Food and Commercial Workers local, the union that represents 5,000 state-store clerks.

Young, in sworn testimony in Harrisburg in April, cited a study by the Centers for Disease Control that claimed that relaxing regulations on liquor sales would increase consumption and become a public-health issue.

Of course, Young would oppose the sale even if increased consumption would cure cancer.

"This is the first evidence of the virulent attacks on public sector workers that are sweeping our nation," Young testified.

The bill that Turzai introduced Wednesday tries to head off that argument. It provides tax credits for retailers who hire former state-store clerks, tuition assistance for those who go back to school and a 3-point preference in state civil-service tests.

The hardest sell, though, is the moral-high-ground argument.

"Should the entity promoting sales of wine and spirits be the same entitity that polices those sales?" Turzai asked.

That argument rings hollow in a state that expands gambling options every chance it gets.

There are good arguments on both sides. But I'm for sticking with the status quo.

There is always a chance that we may have to come to the aid of a flood-ravaged Johnstown.

Send email to smithel@phillynews.com or call 215-854-2512. For recent columns: www.philly.com/ElmerSmith.

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