Reason #4 -- the 18% Emergency Tax

I remember the first time I visited Johnstown. I was driving in from Pittsburgh, and it had been raining heavily. The sky was still gray and threatening, and local streams and creeks were swollen, brim-full. I mentioned this to a Johnstown resident, and his dead-serious response was, "You might not want to talk about that. We're kind of touchy about that."

Say the name, "Johnstown," and people think "flood." The flood they're thinking of was in 1889, a catastrophe caused by a dam failure, but there were other floods in Johnstown, in 1894, 1907, 1924, and 1977. The biggest flood after the 1889 event, though, was the "St. Patrick's Day Flood" in 1936. Damage was extensive, and the State responded with clean-up and recovery aid. The expenditures were covered by a quickly-imposed Emergency Tax of 10% on all wine and liquor sold in the State Stores.

You may have heard that we're still paying this Emergency Tax. Well, that's not really true; we're no longer paying a 10% Johnstown Flood Emergency Tax. Don't be silly; that was over 70 years ago! No, we're paying an 18% Johnstown Flood Emergency Tax for an "emergency" that ended 71 years ago, because the State raised the tax to 15% in 1963 and then again to 18% in 1968. That's some emergency.

Reason #4:

The Ridiculous 72-Year Old Emergency Tax

You may find this hard to believe, so here's the proof, right off "e-TIDES" (PA's Electronic Tax Information and Data Exchange System). You'll see at the bottom of the page that the cite is "Emergency Liquor Sales Tax Act, Act of June 9, 1936." The emergency has been over for 70 years, and of course, the money hasn't gone to the citizens of Johnstown (or...the contractors hired to help the citizens of Johnstown) for many, many years: it goes to the General Fund. It's just money the State is taking from you every time you buy booze.

The Emergency Tax is an amazing thing, kind of the creamy center of a towering cake of taxes Pennsylvanians pay when they buy booze. First, there's the actual cost of the packaged beverage. The federal excise tax is added at the producer/importer level. Then the fun starts. The State imposes its set mark-up (for "profit", which in the case of so-called "control states" is really an additional tax, since it all goes to the State) of 30%. Now put that luscious Emergency Tax in there, adding 18% of the cost, the federal excise tax, and the 30% mark-up onto your bill. Think that's rapacious? Wait, there's more! That's right, folks, now you get to add the 6% State sales tax (7% in Philadelphia County)!

Let's look at that. Say you get a bottle of 100 proof bottled-in-bond bourbon. Cost from producer: $10. Federal excise tax of just about $2.50 (it's a set amount per gallon of 100 proof liquor; that's why we bought bottled-in-bond):$12.50. The State's mark-up of 30% is $3.75: $16.25. Now add the 18% Johnstown Flood Emergency Tax of $2.93 (note that it's more than the federal tax): $19.18. Top it all off with the 6% sales tax you pay on computers, cars, books, pets, toilet paper (whoops -- turns out PA doesn't tax toilet paper; make that kleenex...which, believe it or not, was what I had there originally, and for some reason, changed it)-- $1.15 -- and you get a grand total of $20.33. That is more than twice the cost of the whiskey.

Please note three things. First, there may be some additional charges in there that I've missed: the PLCB's site does not make it easy to get a total breakdown of charges. If I get better data, I'll add it. Second, this is what's called a "regressive tax." As a flat percentage, it hits poorer people harder by taking a proportionally larger part of their income. (Thanks to Grey Lodge Pub owner Mike Scotese for pointing that out.)

Finally, I hope you noticed that the Emergency Tax taxes the tax: you're paying 18% of both the federal excise tax and the State's "mark-up". Of course, the State sales tax then does that too, taxing the Emergency tax, and effectively taxing the federal tax and the State's mark-up twice. It's sweet, what you can do in business when you write the rules.

Is the Emergency Tax higher than other states' booze taxes? It's actually hard to compare state liquor taxes. Many of them (but not all) are imposed on gallons at a set rate, rather than a percentage, so the tax load is actually lower on high-end booze. Not the case in Pennsylvania, where you're expected to pay 18% on $500 bottles of single malt (and that nifty 30% "mark-up," don't forget that).

The Pennsylvania Tourism & Lodging Association has an official position supporting repeal of the Johnstown Flood Emergency Tax. They point out that the tax, along with the State's monopoly pricing and minimal bulk discounts, puts Pennsylvania restaurants and bars at a distinct price disadvantage.

I can't realistically expect that the state will repeal the Johnstown Flood Tax and leave us with no excise tax on liquor and wine at all. What I would like to see is something more in line with other states. Something like this:

The PLCB should be abolished so that the current compound tax situation of an artificially imposed state "mark-up" of 30% -- a de facto tax -- plus the ludicrously outdated "Johnstown Flood Emergency Tax" could be replaced by a tax system more in line with neighboring states.

Collecting those taxes could be a lot easier, too...but we've got plenty of Reasons to address that. For now, let's zero in on admitting that the Johnstown Flood Emergency...is over. The emergency is a state legislature with a drinking tax problem.

Does anyone at the PLCB know what the word "monopoly" means?

Great story in today's Harrisburg Patriot-News about the PLCB's latest bizarre "Stalinism with a happy face" idea. The PLCB is spending $3.6 million (I hope I don't have to remind you where they got it...) to get guidance on public image, advertising, and store layout. They've contracted with Landor Associates, a San Francisco-based "branding" firm that advises Microsoft, Pepsi, and Levi's, according to the story.

The PLCB is coming off a record year: $1.7 billion in sales, up 7.2% from the previous year. More to the point, the PLCB is a monopoly. They don't need a public image, they're the only damned game in town. If they want you to buy more booze, they're directly contradicting their other main mission: controlling how much booze you buy. And finally, I don't care if Ed Rendell told PLCB chairman Stapleton "Run this place like a business, not a government bureaucracy," it's not a business, it is a government bureaucracy.

That's the whole problem. We don't need the State to be selling liquor and wine, telling us what we can buy and can't buy, where we can buy it, when we can buy it. The State doesn't tell us where to buy gasoline, or jewelry, or guns, or cans of tuna. Prohibition is over, and it's not coming back. The State Store system doesn't make sense for any of the original reasons given for its creation.

So stop spending our money to make this ridiculous proposition more palatable. Spend the money on a plan for a smooth transition to privatization.

Reason #3 -- Where's the Beer?

It's always a struggle when I try to explain Pennsylvania's booze-selling "system" to folks from outside the state. We don't have the 3.2 beer dichotomy some states have, or the ridiculous beer taxes they have in the South (your beer taxes are flippin' ridiculous, and you should tell your state legislature to lower them...er, good luck), or a useless keg registration law. What we have are the State Stores, where you have to go if you want to buy wine and liquor (except for buying direct at Pennsylvania wineries), and that's weird enough.

But when I tell them that you have to go to a different store to buy beer, a privately-owned store called a "distributor," and buy it by the case; or go to a bar and buy it by the six-pack (but only two six-packs at a time)... They look at me like I'm nuts.

Hey, guys, it's not me: it's the Pennsylvania Liquor Code that's crazy.

Reason #3:

Beer, wine, and spirits cannot be sold in the same store.

Why don't the State Stores sell beer? It's not that I want them to. I just don't understand why they don't. Of course, I don't understand why beer distributors can't sell wine.

I can guess. I suspect it's because the State didn't want to be in the business of keeping anything refrigerated, which even they must realize has to be done with unpasteurized draft beer. It might have had something to do with the sheer bulk of beer: $500 worth of beer takes up a lot more room than $500 worth of liquor or wine.

Whatever it is, it's as screwy as every other part of the PLCB and the Liquor Code. (Why do we call it "Liquor Code" and Pennsylvania "Liquor" Control Board, anyway? Wine and beer are great, but they're not "liquor." Boobs. Philistines. Know-nothings. But we knew that.) It's arbitrary, it makes no sense. Perfect!

Tell you the truth, I'd like to see a system of privately-owned "package stores," selling all kinds of booze (any way you want it: cases, singles, kegs, cold, warm, whatever), snacks, maybe a deli, booze paraphernalia (glassware, towels, books, magazines, etc.), and maybe lottery tickets and smokes. If that was as common as a drugstore, I wouldn't care if it wasn't in the supermarket. I'd really rather see booze as a specialty store...but I'm just one guy. I think we can all agree that it would make a lot more sense to have wine, beer, and spirits sales all under one roof, whatever that privately-owned and operated roof might be.

This reason really bugs me because it's arbitrary, because there's no reason given. It also has lead to beer being the red-headed stepchild. For example, the State Stores took credit cards for wine and liquor sales for years before beer distributors were allowed to. The vaunted Chairman, John Newman of Sainted Memory, did wonderful things for wine-buyers in the State: beer got the back of his hand, except for Sunday sales at distributors.

The PLCB should be abolished and the Liquor Code rewritten to put all the booze -- spirits, wine, and beer -- where it belongs: in one place, for sale in any quantity, by private businesses.

This one's pretty simple. Which makes it all the more frustrating.

And I thought I had to get people angry?

I started this blog to get people in Pennsylvania angry about the PLCB. I figured once enough people realized the problems inherent in the State Store System and the Liquor Code, they'd get angry enough that we could start thinking about political action.

I'm wondering if I underestimated the level of anger already out there. Steve Twedt did a series of pieces on the PLCB in the Pittsburgh Post-Gazette back in January (more about that in the near future: great work by Steve). The paper opened a forum on its website to see what people thought about the PLCB.

Take a look. These people are mad enough to march on Harrisburg now; there were a substantial number who said it was one of the reasons they'd left the state.

"I believe the Pennsylvania Liquor Control Board is an antiquated system that should be abolished immediately."

"This arrangement is insane to anyone experienced in service oriented retail business."

"It doesn't curb underage drinking or alcoholism, has no effect on drunk driving."

"The way the state runs the package stores is illegal. They run it as if we are in Russia."

Well, and one or two malcontents...

"I absolutely love the fact that the government of Pennsylvania still cares about the health and well-being of its citizens and children enough that it controls liquor sales...why is it the state's job to get more people to consume alcohol? It isn't. Alcohol is a drug. Long live our wonderful state store system!" (Dude...they sell drugs every day...at privately-owned drugstores.)

Looks like the revolution may start without me.

Reason #2 -- The Two-Headed Monster

Mutations occur all the time in nature. Two-headed calves, wingless birds, albino alligators: they're not normal, they're not how things were meant to be, and they rarely survive without being kept alive by human interference.

Kinda like the two-headed monster called the PLCB.

Reason #2:

Buy More Booze! (But Don't Drink It!)

Is it any wonder that the PLCB is such a second-rate purveyor of booze? It's like Wang Chi says in Big Trouble in Little China: "My mind and my spirit are going north and south!" On the one hand, the PLCB is supposed to be making sure that Pennsylvanians don't drink booze in any illegal (or immoral) ways, or drink too much of it, or drink it before they're of legal age, or buy it without paying the full load of taxes. But on the other hand, the PLCB sells all the wine and liquor in the state (except for the small amount sold at Pennsylvania's wineries), and the more they sell, the more money they can give to the state (and insure their continued job survival).

Or, as they put it in the PA Liquor Code:

This act shall be deemed an exercise of the police power of the Commonwealth for the protection of the public welfare, health, peace and morals of the people of the Commonwealth and to prohibit forever the open saloon (can you say "Repeal-era language"?), and all of the provisions of this act shall be liberally construed for the accomplishment of this purpose. ("Liberally construed" means, I assume, that if the local enforcement agent can find a way to hassle you, he will...and more about that in the future.)

and furthermore,

The provisions of this act are intended to create a system for distribution that shall include the fixing of prices for liquor and alcohol and controls placed on prices for malt and brewed beverages, and each of which shall be construed as integral to the preservation of the system, without which system the Commonwealth's control of the sale of liquor and alcohol and malt and brewed beverages and the Commonwealth's promotion of its policy of temperance and responsible conduct with respect to alcoholic beverages would not be possible.

(I would invite all the Christian folks who find a religious bias against booze to consider the contradictions inherent in this situation, specifically in Matthew 6:24: "No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other." Sounds like the quandary of the PLCB, right there in the holy writ.)

What's it gonna be, guys: sell sell sell, or are we putting an end to the scourge of demon rum? I don't think it's fair to ask an agency to do both. It's got to cause strain on the brain. I know it does for me. In politics, in research, this is called conflict of interest (yes, in journalism, too, but let's keep that riveting discussion to other blogs), and this is a direct, no-question-about-it conflict of interest: Buy our booze so we make money for the state, but don't buy booze so the (how'd they put it?) "public welfare, health, peace and morals of the people of the Commonwealth" are protected.

This conflict of interest is enshrined in statute. The PLCB is tasked with both jobs. It would be like tasking the PA Department of Agriculture with selling a ton more PA-produced cheese and meat and butter while also making them responsible for encouraging Pennsylvanians to eat a healthy diet full of green leafies. We don't do that: the PA Dept. of Health is responsible for that kind of diet recommendation. Besides, a healthy diet can include cheese, meat, and butter; it's the amounts that are the issue... just like alcohol consumption.

So why isn't that "consume alcohol in a responsible manner" job part of the Department of Health? Why isn't enforcement of licensing part of the Department of Revenue? Why don't we leave criminal enforcement to the State Police and local law enforcement instead of running it through the all-too-autonomous Bureau of Liquor Control Enforcement and the PLCB's all-too-lazy judges?

There are a number of reasons, but I believe, at the base of it, it goes back to two things. First, Pennsylvania's liquor code is still mired in the era of Prohibition and Repeal, and the same patronizing attitude towards "public morality" that I noted in Reason #1. But second, and just as important, is that the State Store System provides a huge chunk of cash to run an anti-alcohol bureaucracy, something that makes it look like this is all self-funding.

Wrong. If there's one thing I've learned, it's that government revenue is fungible. The money coming into the PLCB coffers could just as easily go to the Department of Health as stay in PLCB hands for anti-alcohol programs; it's an entry in a spreadsheet, not a bag full of cash. Split off those functions -- after first determining whether any of them are worthwhile (this college-focused program actually has some excellent components), or if they're ridiculous anti-alcohol propaganda -- and assign them elsewhere. Then the agency won't be going in two different directions at once.

Even better...split off those functions and do away with the PLCB's retail function altogether, so the State isn't in the booze business.

But that's a topic for another day. For now, let's stick to putting the two-headed monster out of its misery.

The PLCB should be abolished because it is simultaneously responsible for selling legal alcohol beverages, and for discouraging their purchase. The health functions of the agency should be assigned to the Department of Health; the enforcement functions should be divided between the Department of Revenue and the State Police; a greatly overhauled and simplified licensing function could be the job of a much smaller sub-agency at Revenue. Taxation, of course, would be handled by Revenue and the individual privately-owned licensed retail booze outlets.

All of this pre-supposes a complete re-writing of the PA Liquor Code. All I can say is that it's about time...and yes, that's also a topic for another day; quite a few other days, actually.

Spread the Word

One Man's Fight

With stubborn reason
He tackles hypocrisy,
politics, and greed.

And so "Why The PLCB Should Be Abolished" (should've thought of a catchy acronym when I was naming this thing) is immortalized by Captain Hops at Beer Haiku Daily.

Another Marylander (but native Pennsylvanian), the inimitable Sandy Mitchell, noted the blog with a post titled "The Case Against Pa.'s Liquor Control Board."

Meanwhile, PA bloggers are noticing too.

At Muckney Brewing, it's "Lew Starts Some Shi..." with a first line of "And I'm sure, in short order, the fan it will hit."

Over on Nate's Beer and Brewing Blog it's "Lew Takes on the 800-lb Gorilla."

At Kevin Rowe's Philadelphia Area's Cask Ale blog, he notes the arrival of WTPLCBSBA (that's not really going to work, is it?) and says: "Please tell everyone you know about this."

Foobooz.com calls it the PLCB Abolition Movement...hey, there's an acronym.

There was even this on DrugRoar.com (a blog about...drugs): "Lew Bryson has a new blog titled Why The PLCB Should Be Abolished. It’s about (duh) Why the Pennsylvania Liquor Control Board should be abolished; like a lot of Bryson’s writing, it’s entertaining and convincing."

Thanks! Keep spreading the word.

Feedback -- off to a good start

I got the following e-mail yesterday -- only 30 hours after launching this blog -- under the subject line: "You have become my new favorite person." Thinking it was yet another offer from an Ivory Coast millionaire, I almost deleted it, but I looked, and found this.

Dear Lew,

Your PLCB blog and first postings are like the the return of summer to the Arctic after 6 months of darkness. I have been feeling increasingly disgusted and distressed by the alcohol laws in this state and believe that we the citizens need to work to dismantle them. My disgust with the PLCB might have reached its nadir this weekend when I went to buy four bottles of wine at the FXXXX store (the writer said I could post this, but asked me to take out clues to his identity), and was told "you expect me to get your bottles out of the basket?" --- It was about the first time I ever thought about slugging a woman.

My background, Lew, is that PA is the sixth state that I have lived in (which means I have lived in over 10% of the US!). Prior to here I have been in Illinois, Indiana, Wisconsin, Washington, and Michigan. Pennsylvania has the worst, most pathethic system for booze purchasing that I have come across in all of the places I have lived, and I would venture, that the laws here might very well be the worst in the country. It pangs me to no end that I can't go to Trader Joes and buy 2-Buck Chuck or beer, or that I can't go up to Whole Foods to buy beer and wine.

What we need is a ballot initiative abolishing the PLCB and privatizing booze sales -- to start with.

Count me in!

And that's just the best one. There have been five other supportive e-mails (besides the comments I've put up on the blog already) already. I've been contacted by a reporter from a major Pennsylvania newspaper about the blog. There are currently 50 votes on the site poll. Visits to the blog tripled on the second day and today's hits are on track to crush that.

Still waiting for my first negative comment. I'm sure it won't take long.