Sunday, June 24, 2012

Neo-Prohibitionists are Alive and Well

Taxing alcohol will save us from all sorts of ills, or so many would have you believe. Here's a quote that got my attention this past week:
 "Returning alcohol taxes to their 1977 levels (when the government collected $57 in 2009 dollars per gallon of alcohol) would raise an additional $18.5 billion in revenue across all levels of government -- and also lead to reductions in drunk driving, violent crime and disease."
But things aren't always what they seem. Remember the recently concussed CARE Act? ..... "To keep your kids and communities safe." Somehow I don't think that bill was about our kids or communities. I know, call me a cynic.

Twenty years ago give or take, we had a spate of neo-prohibitionists canvasing the wine business, some well intended with positive agenda's like MADD whose sole focus was to reduce deaths and maimings by drunk drivers. Others flaunted a religious anti-alcohol bias. Some focused on health as well as the costs and damage alcohol abuse can cause families and communities. Governments decided it was a safe way to raise taxes and not irritate their constituents. Wholesalers simply tried to hold on to their monopoly and funded congressional and state campaign coffers to make sure that happened. It was a strange group of bedfellow aligning the Dry Religious Right with Wholesalers and the Government.

This past week I found the above citation in what seemed like a curious article to me. It was a flashback; a return to the neo-prohibitionist days of 20 years ago: Start with the premise that alcohol is bad, and then back into an argument abusing logic along the way.

Taking a small article from NPR that noted we spend more in bars then we do at home versus 30 years ago, the author of that article went on to talk about the reduction in real taxes that has caused:
"In 2009, the federal, state and local governments collected $25 in excise taxes per gallon of alcohol. (That’s not total beverage volume, but alcohol volume; for example, there’s one gallon of alcohol in 20 gallons of typical mass-market beer.) In 1982, that figure was $35, measured in 2009 dollars, a decline of 29 percent."
 My B.S. meter was now piqued since I don't spend inflation adjusted dollars. I spend real dollars.
"It makes sense that these policy shifts would push alcohol prices down at the store and up at the bar. But it doesn’t make sense that such policy shifts happened in the first place."
Now we are in full bore BS mode. The author who is a taxation expert at the Manhattan Institute (I don't know what their agenda really is), has made a leap in logic first deciding that there's a policy shift at all, and that caused more money being spent in bars versus homes, and second that less alcohol by volume is consumed now leading to a reduction in inflation adjusted tax revenue. Offering no support that a policy shift has caused the change in behavior, I feel justified to offer an equally unsupported but more rational opinion: How about in the past 30 years the American consumer has opted more for convenience, eats out more often, and as a consequence, spends more in bars and I'd add by the math since the report says we still spend the same amount on alcohol, drinks less volume of alcohol than 30 years ago. Further, I'd suggest consumers are paying more for alcohol on a real dollar basis as a result of the premiumization of the product. But nonetheless, with broken logic the article's author concludes the argument with:
"....and (higher taxes on alcohol will) also lead to reductions in drunk driving, violent crime and disease."
So there you go. We can balance the budget by raising regressive taxes on alcohol and at the same time, save everyone from all sorts of crime and disease. Funny thing is, Prohibition showed that trying to eliminate alcohol only caused more crime, and the weight of medical research suggests that wine and some level of alcohol use in moderation is more healthy for most than not.

But one thing is clear: Neo-prohibitionism may be less visible, yet the underlying agglomeration of strange bedfellows isn't yet dead.


  1. Every bartender knows that there are three dangerous topics to avoid: Religion, Race and Politics. So just in general Prohibition is a bad topic to mix with any alcohol.

    You missed a very interesting Key-note presentation at the Shipcompliant Direct Conference:

    Rowan Gormley spoke of the cost of wine imbalance in the US market vs. that of the rest of the world. He used the figures of 1-3 cost of wine in Europe versus the retail price and 1-7 for the US market! He believes the US market will come closer to Euro figures in the next 5-20 years. Scary for the audience of Napa wine producers!

    Next up was John Beaudette (MHW CEO) singing the praises of Prohibition and the laws that followed repeal. He claimed that solved all the crime and violence that occurred before and during Prohibition.

    Well I found it amusing anyhow:)

  2. Thanks for the comment McS. I really like that conference too and was asked to speak this year, but for the second year in a row was in Hawaii on vacation during the goings-on. Let’s see…. Hawaii or a wine conference …. yea – not a choice. But I have promised the ShipCompliant folks I’ll be available next year and will hope to attend either way.

    I suspect Rowan was speaking of the added costs involved in implementing the Three-Tier system as the real costs of making wine aren’t THAT much different. Rowan knows too well having successfully launched his Naked Wine brand in the UK, about the differences in getting wine to the end consumer now that he has launched in the US. I loved one comment he made to me over dinner one night this spring:
    “I’ve always thought of the US as the protector of true Capitalism. You guys are worse than the EU when it comes to wine laws.”

    My response was we got our start from the British in Common Law so … It takes one to know one.

    Yes – the closing of prohibition did solve many/most of the crime problems that existed. It was the point I was making above; taxing alcohol – in the same way trying to legislate elimination of the product as we did during prohibition, won’t reduce crime. I can argue making alcohol more expensive or harder to get will increase crime.

    Our 3-tier system is crumbling from within as distributors have cooperated with DtC pioneers, and from without as well with legislation and law going against the established system in the past 20 years. The market share of 3-Tier is being replaced by the 5th Column of on-line wine business and that will reduce the costs of delivery as Rowan suggested.

    Not said in my post above, I’m not opposed to amending tax law on alcohol. I am opposed to authors who leap logic and come to flawed conclusions with a predetermined bias. But if someone wants to talk about rational reasons to increase taxes on alcohol or anything else for that matter, we all should be interested in finding ways to not saddle our children with the insane debt levels today and we should all listen.

    1. I like the 5th Column, but I prefer calling it the nobletier as in a noble way to get wine to the consumer and allow the producer and consumer to know each other and form their own relationship....

  3. Neo-Prohibitionists come in all shapes, sizes, colors and professions, in our small town, the new neo-prohibitionist is the planning director who is on a crusade to make the handful of micro-wineries that had licenses for few years; effectively finding any excuse to rescind their 02 permits to taste or sell wine from their premises. And of course there is always the democrat that wants to have the tax and spend coffers stuffed by the small businesses that are so over regulated by bureaucrats, that it maybe easier to shut the business down.

  4. Anonymous - Totally agree. What you're describing is an abuse of power in the one case, and a status-quo in the second. Its what we have a ballot for, but when the positions that fall into the Neo-Prohibitionist ranks, there isn't a ballot option.

    McSnobbelier - I like Nobletier, and maybe McNobletier too ... but I'll stick with the 5th Column descriptor for now. I am (no kidding) testing to see if the name can get adopted just using Social Media. I'm curious how far SM has come and seeing a term adopted would be a really interesting data point about the consumption of that information.

  5. Rob, you inspired me. Your story,a s serious as it is, still has your style of writing that made me laugh out loud: "Full BS Mode." Who doesn't know what that's all about.

    I couldn't resist and wrote my own story, citing you. I called it, "Busy bodies, they make the world go round… sorta…"

    Thanks for the inspiration.

  6. Rob - FYI - The Manhattan Institute is a think tank co-founded by Reagan administation luminary William J Casey. The Institute's headline as of 7-2-12 reads, "Erik Jaffe, law clerk for Justice Clarence Thomas joins MI experts . . . to discuss the Obamacare Supreme Court decision." Any questions?

  7. Thanks Bill. I expected someone would answer that open-ended question.


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