The bill is part of a growing interest in eliminating North Carolina’s state-run liquor monopoly. How would privatization impact convenience, cost, and public health and safety?
WILMINGTON — In response to House Bill 971 that aims to privatize the sale of liquor in the State of North Carolina, CEO of the New Hanover County ABC Marnina Queen, is requesting the county’s Board of Commissioners sign a resolution in support of the current state-run monopoly on alcohol sales.
House Bill 971 is a sweeping act that if passed as written would, amongst other things, eliminate the state’s ABC system and allow for the private sales of alcohol starting on January 1 of next year. Unsurprisingly, the local ABC is pushing back against the elimination of their business citing several reasons including revenue generated and health concerns.
If approved, the bill would allow both wholesale and retail stores to ship their products in and out of state without regulation from the state. It would dramatically increase the number liquor selling locations in the state, as well as changing how — and how much — liquor is taxed.
Queen spoke with Port City Daily about the New Hanover County ABC Commission’s stance on convenience and cost, state-run monopolies, and whether liquor drinking is a health and safety, or a morality issue — you can read answers to questions below.
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Convenience and cost, government monopoly, and morality
House Bill 971 is not the first legislative attempt to loosen the ABC system’s grip on liquor — or eliminate it entirely. It’s not even the only bill this legislative session (it’s actually the third).
Queen addressed three main critiques of the state-run liquor system: the convenience – or inconvenience – of selling liquor only at state-run stores, questions over whether the government should privatize any particular industry, and whether liquor is a health issue or a moral issue.
Convenience and cost
According to Queen, she believes that – if passed – House Bill 971 would increase the number of liquor stores dramatically, from the eight locations currently run by the state to 30, or as high as 50, privately run stores (including grocery and other stores that could add liquor to their shelves with a permit).
The bill would allow these stores to operate seven days a week, from 7 a.m. to 2 a.m. on every day except Sunday, when hours would be 10 a.m. to 2 a.m. So, with more locations and longer hours, would customers find this more convenient?
Queen said maybe, but worried about price and selection at private stores.
“The thing I worry about is that our customers are not going to be able to find the brands they want,” Queen said. “For small and local distilleries, I worry, are stores going to allow them shelf space?”
Queen added that, with more stores, there will be a shorter supply of limited-run and small-batch liquors at each store. And that scarcity, Queen said, will likely mean price hikes.
“We have people come in, especially from up North, and they say they can’t believe the selection we have,” Queen said.
Queen cited the example of Washington, where the state-run liquor system was dismantled in 2012. The state went from 330 government stores to over 1,600 private stores. According to Queen, the result was “fewer choices, higher prices” for customers.
“The average cost of a fifth went up by 15 percent, a half-gallon went up 4 percent, bars and restaurants went up 13 percent,” Queen said.
Under HB 971, the state’s current 30-percent excise tax on liquor would be replaced with a $28-per-gallon flat tax. In theory, that would increase the cost of cheaper liquors and decrease the cost of more expensive ones.
How? A $10 750 ml bottle currently gets a 30-percent increase, so it’s $13 on the shelf of an ABC store. Under HB 971, the bottle would get a $5.60 increase (one-fifth of a gallon would pay so one-fifth of $28 in taxes), so the bottle would be $15.60 on the shelf. Conversely, a $100 750 ml bottle is currently $130 at ABC; under HB 971 it would be $105.60.
However, as Queen pointed out, a $100 bottle is likely to be rarer, and while ABC stores hold prices at MSRP, private stores can raises prices based on demand. In other words, you’ll pay less in tax on a bottle of Pappy Van Winkle, but it’s unlikely to be cheaper at checkout.
Queen also noted that the ABC Commission’s February program evaluation made several suggestions to the General Assembly to modify state law to allow smaller special orders (less than a case), delivery options, Sunday openings, and in-store tastings.
Government monopoly
The state’s ABC Commission and it’s county branches are a self-described monopoly system, originally created to control liquor quality — an issue that, in the decades after the bathtub gin era, is far less pressing than it was in 1935.
Queen acknowledged that no one is likely to go blind from bootleg liquor in 2019, but said the ABC Commission is still charged with a public health issue. As Queen put it, the public health effects of liquor still require government intervention.
One issue was underage drinking selling to intoxicated patrons, Queen said.
“If you eliminate the profit motive, you reduce the motivation of an overzealous clerk to sell to a minor or an intoxicated person,” Queen said, adding that she believes based on studies of states like Washington that liquor consumption would increase by as much as 20 percent.
Queen argued that liquor “is a different product than beer and wine,” and that “while people can abuse anything, I think what we’ve seen statistically, the community wants spirits to be controlled.”
Queen also expressed concern that in private stores (including, potentially, grocery stores) that in-store advertisement could more readily be aimed at underage drinkers, citing the example of grocery stores stocking ping-pong balls and red plastic cup in the beer aisle (i.e. promoting heavy drinking through “beer pong”).
Queen also said that the current county-based monopoly system returns excise tax to the community, whereas it’s not clear how the state tax of private sales would work. Queen said she feared taxation after privatization would less effectively return to the local area.
The question remains for some: why does the government control liquor and not other potentially dangerous items like sugary foods, tobacco, or firearms? (All of which lead to health issues as serious or more serious than those caused by alcohol.)
Queen agreed that part of the picture is that the ABC commission has been around a long time, and has historical inertia. The public would likely be far more resistant to the government taking over an industry in 2019 than a government monopoly that’s been in place for over eighty years.
By the same token, Queen said, if the state were to privatize liquor, “there would be no going back.”
Morality
Control of liquor is often presented as a public health and safety issue. Queen cites a 2013 study that suggests “State control over the [liquor] retail is associated with lower per capita rates of crime for aggravated assaults, fraud, domestic abuse, and vandalism.”
But ABC control of liquor is also explicitly presented a moral and even religious issue. It’s not just that ABC stores are closed on Sunday. The website for NC Keep It Local, created to oppose HB 971, cites as its top reason to “keep it local” the argument of Dr. Mark Creech, who states “to abandon the current system would be a total lapse of intellectual and moral judgment.”
While defending the ABC system, Queen specifically cited the website, and quoted the statement by Creech, who is the executive director of the Christian Action League of North Carolina. Queen said she was familiar with Creech’s work.
It’s worth pointing out that Creech has also voiced strong opinions on other social issues: he opposed gambling, abortion, the Brunch bill and the repeal of HB2, framed the destruction brought by Hurricane Florence in terms of people’s need for religious devotion, decried the Supreme Court decision to support gay marriage, and has repeatedly called for the opposition of homosexuality in general, saying “to fail to oppose homosexuality is essentially to legitimize it.”
While some would agree with Creech and others disagree, there’s no mistaking that his morality is rooted in a particular religious belief. So, should the state government be in the business of making policy based on that?
Queen said only, “no comment.”
Michael Praats can be reached at Michael.P@Localvoicemedia.com, Benjamin Schachtman can be reached at Ben@localvoicemedia.com
