Wednesday, July 31, 2013

Liquor privatization in Washington

The state of Washington has benefited from liquor privatization.  (H/T The Commonwealth Foundation)

Liquor consumption is up, as opponents predicted, but not by a dramatic amount. In the 12 months that ended May 31, state-taxed sales of liquor, including bars and restaurants, were up by less than 1.5 percent. 
People complained that prices in private stores were higher, and generally they were. The average retail price per liter sold, including tax, was $23.87 in May 2013, up from $21.07 the year before. Bars and restaurants paid an average $18.77 in May 2013, up from $18.09 a year earlier. Tax collections were up 9.7 percent; the privatization initiative was written to insure the state came out ahead, and it did

A couple notes:

1. Prices should fall, as long as the tax isn't too large.  Washington state decided to put in a very large tax, which helped prompt price increases.  Also, the number of permits that are allowed to firms to sell liquor will influence the price.

2.  The price paid doesn't contain the implicit tax that consumers were paying before for their lack of convenience.  For me to go to a liquor/beer store instead of buying alcohol at a grocery store, it might take an extra 10 minutes.  If I value my time at $30/hour, that is a $5 tax.

Pennsylvania would benefit from liquor privatization ... I hope our politicians do the right thing and end the government's control of liquor.

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