Why PA won't lose money privatizing

There are two conflicting arguments proponents of the State Stores use to say we shouldn't privatize. The first is the old "liquor store on every corner" lie, trying to scare us with images of urban decay, and the second is that prices will go up (because you know, like how competition always makes prices go up) and selection will go down. The selection part is just laughable, since we all know what the private sector can provide. If somebody wants it, the private sector will provide it: that is just how free markets work, as shown by everything else you purchase. If you don't believe it, think about how many different candy bars and single-serving drinks the average Sheetz offers.

That leaves "but we'll have too many stores," although nobody can define what the right amount of stores are except for the free market - stores that fill customer needs will survive, and if they don't, they won't. What does that mean for the state?  It means that it will collect more license fees, more business taxes, more sales taxes, and more excise tax and of course, more people will have to be working because all those stores don't exist since they can't all be current existing stores. So according to the pro-State Store folks, using their weak logic, amounts collected have to be greater than the current amount because more is being sold at a higher price.

We know sales will go up because they have elsewhere. PA isn't going to be special in that regard.  Will they go up 44% like the favorite CDC report the UFCW uses - doubtful since they haven't anywhere else. Will they eventually get up to the national norm? Probably, if they open more stores than the relatively small amount called for in HB 466 or Senator Wagner's proposed bill.

In the only recent example of privatization of a control state, total sales in Washington went up about 15%; 8-9% internally and 7% went out of the state, the increase in border bleed. Adding 27% in new fees probably had a lot to do with the increase in border bleed, so the lesson for PA is don't do that. Let's pick a reasonable number for how much prices may go up -- say 5% -- and let's stick with a 15% increase in sales. I think that will be a little low since we will be privatizing both wine and spirits while Washington only did spirits but I'll stick with it since it is a real number. That means the total sales will be about $465 million more than they were last year, or an increase of about $116 million in just tax revenue not counting all the other stuff, or pretty much a zero net in terms of liquor revenue but a larger gain in overall economic activity.

Border bleed will probably stay close to what is is because greater convenience will cause people to buy locally and the slight price increase won't change the buying habits of too many. But then you have all the new employees working, delivering to bars and restaurants, more distributors with new warehouses, new superstores being built where none exist today. All of that adds to the economy too, and all of that is something the PLCB won't provide; can't provide.

There's a sub-argument that private stores can't survive on the wholesale and retail markup of 30% like the state stores do. Bullshit. The PLCB doesn't survive on only 30%, they currently have an effective 45.2% markup (Gross Revenue From Sales divided by COGS), and they get there with all sorts of hidden fees and charges generally unknown to the buying public while all the while saying the markup is only 30%. They lie. The 5% increase I mentioned above would move that to just over 50% and lots of businesses would love to have that or even the 45.2% effective rate the PLCB has now.

Now let's say - horror of horrors - that prices actually decline. Lower prices increase demand which means more workers are required to fill that demand, which means more product is being sold which means that more sales tax is being collected.  The excise tax collection will go up too. Lower prices will decrease border bleed as competition and convenience cause more people to buy locally; as it will be is easier and/or cheaper or both. That causes sales to rise even more. There might even be an increase in out of state buyers that come into PA to buy.  So where do we end up?  Ahead of where we are now that's for sure. Ahead in jobs, ahead in tax collection, ahead in license fees, ahead in business taxes, ahead in income taxes, ahead in paying less future pension debt, ahead in convenience and ahead in consumer satisfaction.

Don't listen to him Tim and Skip - he's talking that crazy talk!

So if all the other states surrounding us have higher prices, as numerous state store people say, then if PA prices rise we'll be normal, if prices go down and get close to what most people believe are the better prices in New Jersey and Maryland, we'll be normal. And if we get the state out of the liquor business, we'll be normal like most states.

I vote for normality, not monopoly. Dump the system and move Pennsylvania back to normal.