America’s Booze Laws: Worse Than You Thought!

Commentary about business and finance.
June 12 2014 1:23 PM

Rum Deal

Counting up all the ways America’s booze laws are terrible.

(Continued from Page 1)

While Pennsylvania’s system seems skunked at first sip, it makes all too much sense looking through the bottom of a glass of ice-cold economic theory. The competing commercial interests of beer distributors, six-pack sellers, liquor companies, craft breweries, and the state store employee union make large, meaningful changes hard for all the interest groups to swallow, not unlike a shot of Malört. The most recent privatization proposal gave concessions to the distributors, tavern owners, breweries, and wineries, but nothing to the unions, prompting the United Food and Commercial Workers Local 1776 to produce this hilariously hyperbolic ad, which ends with, “Well, it only takes a little bit of greed to kill a child.”

That said, the ad did have another, more legitimate point: State-run monopolies generate huge revenues for state coffers. Virginia makes about $230 million a year from its ABC stores, and Pennsylvania collects $494 million in profit and tax from its shoppes, which is a ton of money for a state currently facing a $1 billion dollar deficit.

Supporters of privatization argue that licensing fees and increased tax revenues will more than make up for the lost profits, but the devil is in the details. Washington privatized its liquor stores in 2011, leading to a 9.7 percent increase in tax collections and an increase in average liquor prices. But that’s only because the law was designed to improve the state’s bottom line. Other control states would need to similarly increase their alcohol taxes in order to make privatization revenue neutral. Raising taxes to overhaul a socialist system would strike some right-wing reformers as a Faustian bargain.

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Even downright inane laws can have serious economic effects. The 64-ounce growler is illegal in Florida, Idaho, and Mississippi. When I asked Orlando-based liquor law expert and attorney Trevor Brewer why, he said: “Every regulation has the ability to make someone very wealthy.”

According to Brewer, Miller Brewing upset the Florida legislators by opening its new beer-flavored carbonated drink factory in Georgia instead of the Sunshine State. At the time, Miller was heavily promoting its 7-ounce pony bottles, so Florida banned the sale of bottles and cans in sizes other than 12, 24, and 32 ounces. In 2001, that law was amended to allow any container 32 ounces or smaller, or 128 ounces or bigger. But everything in between—including the beer geek’s beloved growler—is verboten, because Florida’s beer wholesalers hate the idea of potential customers going to breweries and brewpubs filling up growlers.

Over the past two years, breweries and brewpubs have pushed to amend the container size law. Each time, though, the Florida Beer Wholesalers Association killed the reforms with amendments that required microbreweries to sell, then buy back, their own beer to sell at their brewery taprooms and gift shops. Like so many other states, Florida consumers have to choke down this regulatory rotgut while the special interests hold a barroom brawl over control of the Legislature.

There are plenty of other asinine rules that only serve the interests of entrenched groups. Packies in Connecticut benefit from price minimums on bottles of booze sold in package stores. Beer distributors in Utah, Colorado, Oklahoma, Minnesota, and Kansas love that convenience stores there can only sell beer under 3.2 percent alcohol by volume. Liquor store owners in Colorado and New York enjoy laws limiting the number of off-premise licenses one person can own because they effectively outlaw chains. All of these laws, too, would benefit from much needed firewater fixes. Thankfully, success stories abound: South Carolina bars are no longer forced to mix drinks using airplane bottles, and liquor stores are no longer forced to observe the Sabbath in the Constitution State. And if Washington and Iowa can privatize their liquor stores, maybe one day Pennsylvania can, too.

Admittedly, the continued existence of absurd booze laws—and there are plenty I didn’t get to mention—cannot be explicated by the economics of political competition alone. The teetotaler tendencies of the politically dominant Mormon church are the real reason for Utah’s “Zion Curtains,” which force bartenders to mix and pour drinks out of the patron’s sight.

And Chicago school theories can’t explain why home distilling remains illegal. Only the ghost of Carrie Nation (and moonshining’s redneck image) can explain the continued federal prohibition on artisan bathtub gins and handmade, organic white lightning. Many of America’s craft brewers—the beer industry’s fasting-growing segment—learned how to brew in their kitchens and garages. Indeed, the craft beer industry only really took off after Carter loosened federal home-brewing restrictions in 1978. But mastering the craft at home isn’t a legal option for aspiring distillers, which is holding up the nascent industry’s development.

Some argue that home distilling is more dangerous than home brewing, but I don’t buy that. Others say that there’s a federal fear of losing taxes on home brews, but voting to cut taxes in Congress isn’t exactly taboo. No, it’s sheer legislative inertia—a law at rest tends to stay at rest—that keeps home distilling illegal.

Justice Oliver Wendell Holmes once said: “It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.”

I’d drink to that. 

Jim Saksa is a writer and attorney in Philadelphia, where he’s also the editor of the Young Involved Philadelphia blog.

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