Lost amid the drive to expand alcohol delivery in the wake of COVID-19 has been the corresponding push—actually starting even before the pandemic—to allow more types of stores to sell alcohol. While more and more states have allowed grocery stores to sell booze in recent years, these efforts have been fiercely resisted by independent liquor store owners who claim that their small businesses will be forced to shutter if large chain retailers are suddenly able to sell alcohol.

Up until now, these debates have largely been devoid of actual data, but new empirical research has been published showing that grocery store alcohol sales don't really impact mom-and-pop liquor stores after all. At long last, this is one protectionist argument that can finally kick the bucket—if only policy makers will let it die.

Currently, 11 states still forbid wine from being sold in grocery stores while four still prohibit beer. In recent years, states as politically diverse as Mississippi, Connecticut, and Maryland have considered bills to expand wine and/or beer to their grocery store outlets, only to be met with a tidal wave of opposition. Any place where such reform legislation appears, it is immediately opposed by liquor stores in the state—sometimes called "package stores"—which already sell wine and beer and want to prevent any grocery store from becoming their new competitors in the market.

The impact of this protectionism extends far beyond the alcohol market, as well. It is why less populated states that restrict grocery store booze, such as Mississippi, have only one Costco and one Whole Foods in the entire state—and zero Trader Joe's outlets. These stores often depend on their alcohol selections, including their private-label alcohol offerings, to make their business models viable in more locales. Restricting grocery store booze can actually lock entire food stores out of a state.

This setup works just fine for liquor store owners. As one store owner claimed when discussing a Mississippi reform bill: "out of state retail corporations harvest money that could be recirculating in our local economies….Big out-of-state grocery and box retailers have had years of practice of profiting off the destruction of public health in other states." He went on to note that alcohol markets are "unable to regulate themselves without being destructive to public health and safety" and that if alcohol consumption increased, it would put "undue burden" on taxpayers, public safety officials, and the health care industry. One would be hard-pressed to find a business owner who so loathes the very product he sells, but these arguments are sadly par for the cronyist course when it comes to blocking grocery store booze sales.

While it is unclear how one might go about "harvesting" money, it is clear what this package store owner is really concerned about: protecting his bottom line. Unfortunately, package and liquor store lobbying associations are extremely influential in many states, which leads to reform efforts silently dying in committee year after year.

That's why states like Oklahoma and Colorado have opted for ballot initiatives to expand grocery store alcohol sales, as consumers overwhelmingly are in favor of it. But even successful ballot initiatives have not ended the debate, as a group of Colorado legislators introduced a bill in this year's legislative session to overturn the state's wine-in-grocery-stores ballot initiative (which only went into effect in 2023).

The main argument in favor of this repeal bill? "I don't want to see the independent liquor stores put out of business. They are owned by diverse entrepreneurs—50 percent are women- and minority-owned businesses—and provide jobs," said Colorado state Rep. Judy Amabile, a Boulder area Democrat who cosponsored the legislation. 

In other words, Justice Antonin Scalia's famous quip about the notorious Lemon test in Supreme Court jurisprudence—analogizing it to "some ghoul in a late night horror movie that repeatedly sits up in its grave and shuffles abroad, after being repeatedly killed and buried"—could just as readily apply to antigrocery alcohol claims.

After years of scaremongering and anecdotal supposition about whether grocery stores will or will not kill off mom-and-pop booze stores, facts have finally been injected into the debate by FMI, a food industry group. A new FMI paper by Vincenzina Caputo of Michigan State University studies the impact of Tennessee's 2016 reform that allowed wine to be sold in grocery stores in the Volunteer State. The paper compared the number of liquor licenses in post-2016 Tennessee with a hypothetical "synthetic version" of Tennessee in which the reforms were never passed. (This was done via a weighted average of control states that did not pass wine-in-grocery-store legislation.)

The report—a copy of which I obtained from FMI—shows just 62 fewer liquor stores selling wine in postreform Tennessee compared to the nonreform synthetic version of Tennessee—a result which was found to be not statistically significant. Overall, the quantity of liquor stores selling wine in Tennessee increased from 505 stores in 2004 to 733 in 2022, and liquor stores still held the greatest number of wine-selling licenses in the state in the postreform years. 

Further, the Tennessee wine-in-grocery-store reform accounted for a 23 percent increase in wine sales tax volume for the state—undermining the idea that chain stores "harvest" away money from local economies and the tax base.

These results show that our favorite mom-and-pop shops can do just fine in the wake of grocery stores being allowed to sell alcohol. In fact, many of these smaller stores have found a niche specializing in craft beer or hard-to-find wines and liquor that grocery stores have little interest in carrying, a point that both independent store owners and economists have made.

This new research provides a much-overdue corrective to the protectionist claims that small liquor stores have been peddling for years. Now lawmakers just need to listen.

The post Grocery Store Booze Doesn't Hurt Mom-and-Pop Stores appeared first on Reason.com.

The new plan to keep kids from drinking alcohol: Ban kids (and some adults) from buying drinks containing zero alcohol.

No, it doesn't make much sense.

But that's the argument being made by Molly A. Bowdring, a clinical psychologist at Stanford, who wrote this week in STAT that nonalcoholic drinks meant to resemble beer or cocktails are "a potential public health crisis."

The zero-proof beverage market includes brands like Athletic Brewing, by far the largest nonalcoholic beer brand, as well as a growing number of wine and spirits varieties. While nonalcoholic drinks still account for a tiny sliver of the overall beverage market, the rate of growth in recent years has been impressive—driven by consumers who are looking to enjoy a drink without getting drunk.

But won't someone think of the children, frets Bowdring. "While it's great that more people are taking to heart public health messages that reducing alcohol consumption can improve well-being and extend life, an important lesson from vaping as a replacement for cigarettes is being overlooked: What may be good for adults may be harmful to kids."

After contacting alcohol regulators in every U.S. state, she writes that she was shocked to find drinks that contain no alcohol are generally not subjected to limitations placed on drinks that do contain alcohol. Imagine that.

"Children and teens are, by and large, legally permitted to purchase non-alcoholic beverages. This is a huge liability," warns Bowdring. "The path from non-alcoholic beverage consumption to alcohol use among youths appears to be fairly direct….Among minors, consuming non-alcoholic beverages can socialize them to the drinking culture, with the beverages being perceived as cool, adult, and modern."

Goodness gracious, not that.

The logic here is seriously flawed in several ways. Most importantly, banning the sale of nonalcoholic drinks to individuals under 21—which includes a lot of adults, by the way—isn't going to make "drinking culture" seem much different. And even if it did, it is absolutely not the government's job to police what subcultures seem cool or interesting.

If there's a compelling reason for the state to prohibit the sale of alcohol to some individuals, it's on the grounds that consuming alcohol can increase the risk that they harm themselves or others. But kids are already prevented from legally purchasing or consuming alcohol—and someone who is purchasing or consuming a nonalcoholic drink is, by definition, not consuming alcohol in the first place!

Finally, Bowdring isn't arguing that kids who buy nonalcoholic drinks go on to become raging alcoholics or drunk drivers or anything dangerous like that. She's panicked over the possibility that they'll have an increased interest in drinking, period. But learning to drink socially and responsibly—which might include the consumption of nonalcoholic drinks at times—is a key part of being an adult.

This isn't an argument for banning video games because some kids who play video games will someday commit a school shooting. This is arguing for banning video games because some kids who play video games might someday drive a few miles per hour over the posted speed limit.

The post Will Banning Nonalcoholic Beer Save the Children? appeared first on Reason.com.

America's tax code is notoriously convoluted, but the complexity really sparkles when it comes to the federal government's approach to alcohol taxation. Wine, beer, and liquor are all subject to varying tax rates based on intricate calculations, but the so-called "bubble tax" for hard cider is the star of this regulatory circus.

Unbeknownst to most Americans, the tax rate for alcoholic cider is based on, among other things, the amount of carbonation the drink contains. Yes, America technically already has a carbon tax and the feds have literally found a way to tax air. Craft cider makers are being flattened by an arbitrary system that is strangling the industry's long-term potential.

Under the federal code, alcoholic cider is taxed as either hard cider, still wine, or sparkling wine, and the implications of which category applies are not insignificant. Hard cider is taxed at a modest $0.226 per gallon, while sparkling wine is taxed at a whopping $3.40 per gallon—a staggering 1,400 percent increase. For every 100 gallons of cider produced, Uncle Sam either takes $22 in taxes or $340 in taxes. 

What determines how cider is categorized and taxed? A ridiculous three-part formula based on a) what type of fruit is used to make the cider, b) the alcohol content of the cider, and c) what carbonation level the cider contains. 

Imagine you're a cider maker aiming for the lower tax rate to apply to your product. You need to produce a cider that is made from apples or pears (with no other fruit additions), is less than 8.5 percent alcohol by volume (ABV), and has less than or equal to 0.64 grams of carbon dioxide (CO2) per 100mL. However, if you decide to add some blackberries or grapes, it's considered a still wine and taxed at $1.07 per gallon—but only if it has less than 0.392 grams of CO2 per 100mL. If you go over that carbonation threshold, you've unlocked sparkling wine status and with that the $3.40 per gallon tax rate.

Confused? It gets worse. 

If your pear or apple cider is over 0.64 grams of CO2, it gets the sparkling wine rate. But it's knocked back down to the still wine rate if it's less than 0.392 grams of CO2 and the ABV level is 8.5 percent or higher. Whether the bubbles are added via "force carbonated" or "bottle conditioned" carbonation creates another tax delineation for the sparkling wine category. A flow chart is needed just to unpack all the potential permutations and combinations:

The implications of this tax labyrinth extend to consumers. A report from Wine Enthusiast notes that modern drinkers have grown to expect beer-like carbonation levels in their alcoholic beverages, thereby creating pressure for cider makers to add more carbonation to their products. 

One cider maker from Oregon reported that he receives frequent emails from consumers complaining about flat cider, which they incorrectly blame on him rather than the government. If adding more carbonation could financially cripple a small business, it's little wonder many cider makers feel that their hands are tied. 

The disparity is glaring when compared to beverages like beer, hard seltzer, and regular soda, which face no such carbonation-based tax penalties. It's a clear disconnect from market realities and consumer demands, which increasingly favor diverse flavors and more carbonation in ciders.

Craft cider makers are doing their best to diversify the carbonation levels and fruits in their ciders to respond to consumer demand, but it's clear the industry has a hard ceiling on its growth due to these tax rules. This is why many cider makers state that their ability to expand—and the ability of the industry as a whole to thrive—is being pointlessly inhibited.

The bubble tax is now getting more attention due to a recent bipartisan bill introduced in Congress, which aims to level the playing field between apple and pear ciders and those made with other fruits. While promising, the best reform would be to convert the entire system of alcohol taxation to one based simply on a drink's ABV level rather than arbitrary classifications.

Craft cider, a beverage steeped in American history, deserves better. Another Michigan cider maker made it even simpler: "It's not expressing the free market. The government needs to get out of the way."

The post The Federal Government is Literally Taxing Air appeared first on Reason.com.