The truth about liquor control

Posted: March 23, 2013

By Katrina Anderson

Since Gov. Corbett announced his intention to privatize Pennsylvania's liquor stores, the beneficiaries of the status quo have come out in force. Last week, for example, State Store union boss Wendell Young IV and some of his members shouted over business leaders speaking in support of privatization in the Capitol rotunda in Harrisburg.

The friends of government-run liquor stores have to resort to such tactics because they have neither public opinion nor facts on their side. Here, in honor of the state House's historic consideration of liquor privatization Thursday, are just a few of the myths spread by its opponents.

Myth: There's no real support for privatization.

Fact: Consumers choose convenience. More than 60 percent of Pennsylvanians support getting government out of the booze business. This is broad-based, bipartisan support that includes the majority of union households. And the people who frequent State Stores are especially fed up: A full 77 percent of weekly Liquor Control Board customers support privatization.

Myth: The LCB is a reliable source of state revenue.

Fact: The truth is that more than 80 percent of the LCB's $500 million in "profits" is generated by taxes. The rest is taken out of the pockets of Pennsylvania consumers and taxpayers through LCB markups. Private liquor stores would produce the same revenue or more given that they would pay additional taxes and licensing fees.

Myth: The LCB pays for itself.

Fact: The LCB is in the red. The agency ended fiscal 2012 with net liabilities of $9.8 million. That's right: It finished the year owing more than it had. These losses are due in no small part to years of mismanagement, including failed wine kiosks, government wine labels, and inventory systems that couldn't count.

Myth: Shoppers don't mind the State Stores.

Fact: An LCB survey showed that 45 percent of residents in Philadelphia and surrounding counties purchase some or all of their alcohol outside Pennsylvania. This amounts to more than $180 million in lost sales and more than $40 million in lost tax revenue annually from just a handful of counties.

Myth: Privatization has failed in other states.

Fact: Post-privatization prices in Washington state increased because of significant accompanying tax hikes. Despite this, sales of liquor in Washington increased following privatization, reducing border bleed and bringing in more state revenue.

Myth: Privatizing the State Stores will eliminate thousands of family-sustaining jobs.

Fact: Actually, ending the state-run monopoly will create jobs and unleash millions of dollars in new business investment. Expanding existing grocery and convenience stores, and creating new wine and spirits stores, would result in tens of thousands of additional jobs across the state. The governor's privatization plan would allow beer distributors to expand their businesses, create hundreds of new wine and liquor outlets, and enable grocery stores to expand to meet the needs of consumers. It would also provide training and education grants to LCB employees and offer tax credits to businesses hiring displaced workers.

Privatizing the LCB is the right move. Some of the fears about it are understandable, but the benefits the state stands to reap will show that they're also unjustified.

Katrina Anderson is a senior policy analyst and the director of government affairs for the Commonwealth Foundation.

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