Utah state liquor laws are guided by 'profit motive'

Friday , July 18, 2014 - 11:15 AM

Vijay K. Mathur

I have intentionally used the words “profit motive” in the title in the context of state liquor monopoly, and laws and regulations within that framework, because all aspects of laws and regulations indicate that the sole purpose of the state’s DABC is to make money for the state. I understand that the term profit applies to private businesses. But liquor laws and regulations under state monopoly amount to state capitalism to generate profits for the state.

Besides the requirement that drinking age is 21 and above, many other laws are part of pure profit making strategies in the name of reducing excessive alcohol consumption and its associated social cost.

Let me give two examples of laws that support my claim. First, a restaurant chain with 5 or more locations, that serves all types of liquor, beer and wine, has to pay $330 application fee, $10,000 initial fee plus licensing fee for each sublicense not already licensed for each location, plus $1000 renewal fee, plus renewal of each sublicense. Licenses and sublicenses must be renewed each year. For full service restaurants that do not want Master license, application fee is $330, initial fee is $2,200 and renewal fees vary from $935 to $1925 with the cost of liquor from under $5000 to greater than $25,000. These fees would price out small businesses from competing for the licenses.

The second example of profit motive is the law that went into effect on July 1, 2014. The Standard-Examiner reports on July 4, 2014 that bar owners now are legally allowed to buy the right “to pour and serve alcoholic drinks directly from other business owners, instead of the state”. Once again, since the rights are limited the price will increase, as there will be more demand than supply of these rights. Hence once again many small bar owners will not be able to compete with large establishments for these rights.

These examples show that the state is in the business of selling liquor and making profit without any threat of competition, while at the same time using the excuse that it is concerned about alcohol abuse and the cost it imposes on the state. Average alcohol consumption in Utah is increasing over time. According to www.parentsempowered.org, the percentage of underage drinking (politicians claim to reduce) has risen, and the percentage of underage binge drinkers is higher than the national average during 2007-2011.

The FBI arrest data for 2012 shows that the arrests record for drunkenness in Utah (4 percent of total arrests) was almost the same as in the US. However, arrests for violating liquor laws in Utah, as a percentage of total arrests, was almost twice (8 percent) the US rate in 2012, thus imposing exorbitant costs on taxpayers for policing complicated and confusing liquor laws.

The most surprising finding from Centers of Disease Control is about the high cost to the state from excessive drinking. The CDCC reported in August 13, 2013, that Utah had the highest cost per drink ($2.74 per drink). Close to 45 percent of the cost was paid by the state. The cost is due to lost productivity, health care, criminal justice and other related costs, and motor vehicle crash-caused property damage. Evidence does not seem to support good intentions of Utah legislators in enacting laws and regulations. Perhaps laws may satisfy the personal morality of legislators and their backers, which is at odds with the general population morality. Laws are also devoid of practical, social and economic significance to the state.

Sometimes politicians use the argument that these laws reduce driving fatalities. Such fatalities have gone down nationally since 1987, even more in Utah. But Utah has the highest percentage of zero BAC (blood alcohol concentration) traffic fatalities in the nation, even though it has the lowest alcohol impaired driving fatalities in 2012 (National Center for Statistics and Analysis). However, lower driving fatalities could be, for example, due to enforcement of traffic laws or seat belt use. In fact, the detailed study in 2005 by Professor Don Freeman found that only lowering BAC limit to 0.08 g/dl (considered alcohol impaired) had “little or no effect “ on traffic fatalities. However, the threat of administrative license revocation with BAC was very significant in reducing fatalities.

Traffic fatalities data has little relevance to alcohol drinking laws and state monopoly of liquor retail industry. If the state is serious about reducing excessive alcohol drinking it should privatize the industry, pass commonsense liquor laws for individuals and businesses, use tax revenue (likely to increase) to educate young and adults about adverse consequences of excessive drinking, and impose heavy penalties for drunk driving. Monopolizing the industry with onerous laws and regulations, profiting from alcohol consumption and licensing and selling of liquor selling rights, is not the solution.

The state, which takes pride in upholding the virtues of free markets, does not seem to follow its own rhetoric. But it has given the general public the false impression that such state laws are designed for the general public welfare.

Mathur is former chair and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Ohio. He lives in Ogden.

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