Thursday, February 08, 2007

Muncipal liquor stores 

According to a report from the state auditor's office, the 226 cities in Minnesota that operate state liquor stores made $18.8 million dollars from their operation. The St. Cloud Times wonders why.

Sorry, but last we checked, governments are not supposed to be in the business of making money, much less in an industry that has no problem surviving and thriving on its own.

Emphasis added. I'm not sure the Times board means that governments should lose money, though in fact they do. But according to another report of the Office of the Legislative Auditor, the state is losing $100 million from restrictive regulation of the alcohol industry anyway. They are creating a monopoly in these towns, the profit on which is about $19 million. Maybe the town should have two stores, or maybe none (let the resident drive a town away to get their spirits.) We don't know. The OLA report states, however,

Adjusted for differences in taxes and dram shop insurance costs, off-sale beer prices are 7 to 9 percent higher in Minnesota compared with Wisconsin, where there are few state restrictions on retail competition.

There is more competition in spirits than in beer and wine (where the prices versus Wisconsin were found to be about 6% higher.) Municipal liquor stores aren't the biggest issue driving up these costs -- it's more the inability of a brewer to terminate the contract with a beer wholesaler, thus protecting their franchises and allowing the wholesaler to capture more of the profits from sale. Still, it's hard to believe that some areas in the Metro that have municipal liquor stores, like Rogers, Anoka, Wayzata, or Apple Valley, couldn't be better served by the private market. Those places have grown past the 10,000 population limit on setting up muni monopolies. But even for the others, the Times editorial continues, it's not really needed to fulfill needs or to balance budgets (they argue that licenses and user fees would replace the money.)

Our bottom line is this: Governments exist to serve a public purpose.

No doubt, that can be defined quite broadly. But we argue that most Minnesotans would not define that purpose as taking your money when a perfectly fine private market exists to do just that.

Oh, you mean like schools?

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