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July 28, 2011 | By | Posted in Legislature

Turzai outlines plan to privatize liquor stores before House Liquor Committee

Opponents claim it won’t help the consumer
 
By Yasmin Tadjdeh | PA Independent
 
HARRISBURG — State House leaders butted heads Wednesday, disputing over whether House Majority Leader Mike Turzai’s controversial bill to privatize the state’s liquor stores actually would save consumers money.
 
HB 11, which has not been introduced officially in the General Assembly, aims to auction off the state’s 600-plus liquor stores and sell liquor licenses. Turzai, R-Allegheny, has said his plan is at the least “revenue neutral” and could increase revenue by cleaning up “border bleed,” which occurs when people travel across the state borders to purchase alcohol.
 
Auctioning licenses could generate as much as $2 billion in revenue, said Turzai. The state would auction 750 Class A licenses to grocery stores and “big box” retail outlets, such as Target or Walmart, while 600 Class B licenses would be available to independent operators.
 
Pennsylvania and Utah are the only states that exercise full government control over alcohol.
 
“Pennsylvania is not ahead of the curve here; as is typical in many facets, it’s somewhat antiquated, and it’s not consumer-friendly, and it is not the best in terms of law enforcement or curbing access. We can improve on every front,” said Turzai.
 
At a meeting of the House Liquor Control Committee in the House Majority Caucus Room, Turzai spoke before a packed room of legislators, media members and yellow-shirted members of the United Food and Commercial Workers union, a group which represents 3,500 liquor store employees and opposes the privatization plan.
 
Union members said they would lose their jobs, if the state liquor system was privatized.  Union officials did not testify before the committee on Wednesday, but they will at a later time.
 
Turzai said the privatization plan has three main points: improving the buying experience for consumers in terms of convenience, selection and price; enhancing the financial value for Pennsylvania; and strengthening public safety through education, enforcement and regulation.
 
Another main point of HB 11 is consolidating the various taxes the Pennsylvania Liquor Control Board, or PLCB, imposes on all wine and spirit sales.
 
Turzai’s gallonage tax would start at $8.25, with a $12 cap that would disappear after five years. In turn, the 18 percent Johnstown Flood Tax and the 30 percent price markup the PLCB imposes on all wine and spirits would be eliminated.
 
Liquor suppliers would pay the tax, which is based on the amount and type of liquor, indexed to inflation after five years. Gallonage taxes are imposed in 26 states for liquor and 34 for wine.
 
“This proposal will not deplete, but will actually enhance revenues moving forward,” said Turzai.
State Rep. Dante Santoni, D-Berks, minority chairman for the House Liquor Control Committee, questioned Turzai on whether his plan would benefit consumers.
 
“You’re going to have two markups, profit, expensive new licenses for wholesale and retail, and you’re going to get a lower price? I just don’t see it,” said Santoni.
 
Santoni said that under Turzai’s plan, a 5-liter box of wine currently selling for $12.99 would double in price to about $26.79. A 1.75-liter bottle of vodka purchased by the PLCB for $6.25 and with a shelf price of $11.59 would go to about $17.43.
 
Turzai refuted Santoni’s claims with his own examples, citing that a bottle of wine that sells for $13.97 at an out-of-state wine retailer costs $19.99 at a PLCB store. Likewise, a bottle of vodka being sold for $19.99 at PLCB stores can be purchased at a large retailer in another state for $17.99.
 
“We’re getting the same amount of tax revenue whether it’s a private-sector sale or a public-sector sale. We’re going to collect taxes,” said Turzai.
 
But the plan to privatize the state’s liquor monopoly may face difficulty in the state Senate.
 
Last week, Senate President Joe Scarnati, R-Jefferson, said he did not think the state had intended the PLCB to operate “like a business” and suggested reforming the state liquor store system before seeking to privatize it.
 
Scarnati said the state could get a better price for selling the liquor system, if it waited a few years and allowed the PLCB to improve its bottom line first.
 
Turzai said HB 11 will generate upfront revenue from the auctioning of retail licenses and the sale of wholesale licenses, and will at minimum maintain the current $376 million annual revenue going to the general fund from the sale of wine and spirits.
 
Sales taxes account for $122 million of that total and would not be affected by the privatization.
 

 

 

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