Flanked by cases of Budweiser, Four Loko and even Arizona Iced Tea, Gov. Dannel P. Malloy toured the sprawling headquarters Dichello Distributors in Orange. The company serves more than 3,000 bars and stores in Fairfield, New Haven and Middlesex counties and it’s no coincidence that Malloy stopped by on Tuesday.
In an attempt to update Connecticut’s liquor laws and remove restrictions imposed by state government, Malloy talked up his plan to have Connecticut compete with surrounding states.
“They’re eating our lunch,” said Malloy, referencing the money lost to out-of-state alcohol sales. “They’re literally eating our lunch.”
Connecticut’s regulation of alcohol sales would make most free-market enthusiasts shudder. Price controls make it illegal to sell alcohol below a certain price. The blue laws make it illegal for business owners to sell alcohol on Sunday except at a bar or restaurant. Other laws forbid package stores from selling snacks – even peanuts. Currently, it’s even forbidden for one person to own more than two package stories.
Malloy wants to change all this and more.
Liquid Revenue
Malloy’s plan would allow the free market to play out (with one key exception) more than the laws currently allow. He describes the modernization plan as a good thing for consumers, with prices for a case of beer projected to drop $2-$5 and wine bottles from $2-$7. Malloy also sees the law changes as a panacea for some of the state’s fiscal woes.
With Connecticut facing a $145 million deficit in 2012, alcohol sales are seen as a way to help close that gap. Officials hope to raise $8 million a year in additional revenue through the proposed law changes. A study cited by Malloy estimates that Connecticut is losing $570 million in sales [note: the study itself could not be found at the time of publication but will be added later].
Edward Crowley, who oversees 215 employees as president of Dichello Distrbutors, agrees with Malloy.
“The state of Connecticut wins because we keep tax revenue within our borders from sales, keeping them from our neighboring states,” he said at a press conference after the tour.
Medallions Not Just for Olympians
While most of Malloy proposed changes favor opening the market up, a medallion system that would cap the amount of alcohol sellers in the state has a different intention.
Malloy said, “As we modernize, and as we become far more pro-consumer in pricing, how do we retain value for a set of current license holders?”
His solution is a system that rewards existing liquor store owners with a medallion that provides financial incentives while potentially limiting competition. If someone else would like to open a store, they would have to purchase the medallion from someone else at a market price or else they won’t be able to start the new business.
The maximum number of medallions - which are essentially permits - is up to the legislature to decide if they adopt the laws. As past examples in history show, there could be unintended consequences if the cap is set below the demand of consumers.
In New York City, a medallion system has been in place since the 1930s. In 2011, scarcity forced the price of a taxi medallion up to $1 million. In Washington D.C., there’s an ongoing debate as to whether medallions should be issued to taxis. This is what D.C.’s chief fiscal officer determined in a study:
There is broad consensus among economists that such restrictions allow a small group of private citizens—those who are among the first round of recipients of medallions—to earn windfall profits at the expense of consumers and drivers without medallions. Evidence from other jurisdictions suggests that limiting entry into a taxicab market leads to a decline in overall service.
When asked about the possibility of exhorbitantly expensive medallions, Malloy doesn’t see similar issues arising in Connecticut. He said liquor stores per capita are the highest in the country already.
“How many more liquors store do we want to have per capita than every other state?” Malloy said.
Opposition from Small Stores
While Malloy’s plan has the support of beer wholesalers in the state, the Connecticut Package Store Association opposes allowing liquor sales on Sunday.
“The overhead of adding hours and days increases costs to retailers making it worthless to open. Any revenue gain would best be described as blood money, as the public and personal unintended consequences of this proposal become known. Stores sell six days a week, 72 hours a week. If a person cannot obtain alcohol in this time, availability is not the problem,” wrote the association on their website.
Grocery stores, which are already open on Sundays, would be given the advantage since selling alcohol that day comes at no additional cost to them.
The organization also doubts the state’s project revenue increases. To make $5 million more in taxes, the group says there would have to be an additional consumption of 5 million more gallons of beer, 300,000 bottles of wine, 100,000 bottles of spirits or a “combination of these" to generate that much revenue.
Figures.
Read the article and research the facts. This is NOT about lower prices - it's about access to goods on Sunday and better access to goods in established retailers. The biggest resistance is coming from the Connecticut Package Store Association. Look at what they list as 'victories' on their own web site: (comments in parenthesis are mine) -- fight yearly against wine in food stores (protectionism for a small class of retailers, pure & simple) ) -- Sunday sales in all forms ( loss of sales to surrounding states ) -- fought mandatory alcohol server training before any employee could be hired (you want to support an organization that fights AGAINST educating an employee who could allow a drunk kill someone with a DWI ??) None of this is about increasing liquor sales with lower prices - forget that. It's about bringing those out-of-state sales back to CONNECTICUT retailers. Alcohol consumption is relatively inelastic - that means just because the price is low doesn't mean most people will buy more. Yes, someone with an alcoholism addiction will buy at any price, but most consumers will not choose to buy just because alcohol is cheap. Have you ever lived outside of this state? Connecticut's liquor laws are so 17th century - it's time to change.
CT has among the highest "sin" taxes in the country, and last summer they increased the excise tax (again) while Ma dropped the sales tax on alcoholic products. The sales tax ALONE gives Ma a 6.35% price advantage. The producers (distilleries, winerys, etc) are charging the same in both states, the distribution costs are almost identical (CT's gas taxes are higher...), and the retailer's profit margins are probably fairly close (don't kid yourself, the package store owners aren't getting rich...). Bottom line is until CT does something about their tax structure people will continue to buy out of state - regardless of the hours of operation, number of stores, location of stores, or anything else. This is a push by the big box stores and the wholesale beer distributors such as Dichello (CT's main distributor for Budweiser), F&F (Distributes Miller, Coors, Rolling Rock, etc), and several smaller houses (mainly micro brews) to move product into distribution chains that currently don't exist (7-11's, etc.) Read the rest of Malloy's proposal. Do you want the local gas station/convenience store selling beer? It's coming...
"Medallions" is another form of non competition. Liquor licenses are supposed to be a safety mechanism regulating health and quality control, NOT a LOTTERY TICKET for the first come first served. Liquor Licenses are supposed to be open to any individual who wishes to operate a retail establishment and does not have a felony record.