It is time for lawmakers to begin treating Pennsylvanians like adults and get the state out of the booze business once and for all.
Pennsylvania already has the dubious distinction of being the only state in the country, aside from Utah, where state government controls liquor and wine wholesale and retail operations, hardly a core function of government.
The state's arcane alcohol-control regime results in higher costs and a more limited selection for consumers. Recently, the Pennsylvania Liquor Control Board issued a new proposal to further raise the cost of spirits, providing just the latest example of why it's time to put an end to this unjustified monopoly.
On July 30, the LCB finance director issued a memo recommending an increase in the base liquor markup from 30 to 35 percent. The markup is assessed on top of other taxes and is how the LCB generates revenue. Following unwanted attention from the press and public, LCB Chairman Joseph Brion announced that the 16 percent markup hike has been taken off the table. For now.
Pennsylvanians should not take comfort in this retraction. It's clear there are people at the LCB who want to raise the markup; it's only of matter of when. This is precisely why it's time for state lawmakers in Harrisburg to stop dawdling and remove this threat hanging over Pennsylvanians like the Sword of Damocles by privatizing liquor wholesale and retail operations.
The threat of privatization in recent years has kept the worst tendencies of the state alcohol monopoly in check. However, with the legislature adjourned for the summer, and with no reform of the system in sight, it appears that LCB officials felt free, at least until the press and public caught wind of the plan, to sock it to consumers once again. While LCB officials sheepishly backpedaled, it's only a matter of time before they come back to push another markup increase.
Proponents will point to the fact that the markup has not been raised since 1993. Yet it is assessed on a percentage basis, and not a nominal flat fee, so collections rise in tandem with increasing costs and inflation. The LCB has seen liquor tax revenue increase by more than 59 percent during the last decade, yet the agency now somehow needs a bailout in the form of a sizable spirits markup increase.
The proposed increase, which was projected to cost Pennsylvanians more than $17 million, was put forward as a way to make up for the drop in LCB net revenue from $120.7 million last year to $96.2 million this year. A mismanaged bureaucracy is to blame for the decline.
Liquor sales have increased 3 percent annually, while LCB spending has grown by nearly 12 percent. The request for a markup increase thus refutes assertions that the LCB is financially sound.
The office of state House Majority Leader Mike Turzai (R., Allegheny) says the proposed increase shows that LCB officials have not been forthright with lawmakers about the board's financial health.
"Either somebody was intentionally not telling the truth or as an agency they made a decision to mislead the legislature and the public," Turzai spokesman Steve Miskin said. "There was never even a hint of anything negative, anything in the red."
Worse, the current 30 percent base markup is not the only levy assessed by the LCB. Pennsylvania residents and visitors who purchase spirits also have to pay the state's 6 percent sales tax; a logistics, transportation, and marketing fee that ranges from 13 to 18 percent; and the infamous 18 percent Johnstown Flood tax, an emergency levy instituted to cover the cost of cleanup and recovery from a flood that devastated the Western Pennsylvania city. That flood occurred in 1936, yet the "temporary" tax remains on the books and has been increased multiple times over the last 78 years.
That fact that Pennsylvanians must pay this laundry list of taxes when stocking up for their next summer cookout or vacation is even more egregious when considering that they already contend with the 10th highest state and local tax burden in the nation. Aside from more than 20 federal tax increases imposed by Washington over the last five years, Pennsylvanians see more than 10 percent of their income, on average, go to state and local government.
Despite this extensive list of taxes, some at the LCB still see fit to propose raising the markup. It's time for state legislators to protect their constituents by putting an end to the unnecessary agency.
Voter dissatisfaction with the political class in Harrisburg is understandable. The Pennsylvania House passed a bill last year to begin getting government out of the liquor business, but that commonsense legislation languished in the Republican-controlled state Senate.
"Despite bipartisan, majority support in poll after poll, Pennsylvania lawmakers have yet to get government out of the booze business," noted Matthew Brouillette, president and CEO of the Commonwealth Foundation. "The main reason? Government union lobbying and political spending against taxpayers' interests. What's worse is that taxpayers are forced to pay for it all."
Now the efforts to raise the markup demonstrate how the LCB is prepared to continue abusing its monopoly power and why it's imperative for Harrisburg to end the state's antiquated liquor control system.