Auditor General: Liquor privatization would lead to higher prices

Gov. Corbett may not care whether the state makes money off of privatizing liquor, but presumably he cares about this question: Could privatization lead to higher liquor prices for consumers?

One of the fundamental arguments for privatization is that competition among sellers would lead to better selection and lower prices for consumers. But we've known for a while that it's unlikely privatization would lead quickly to a dramatic price drop. In order to avoid forfeiting lots of state revenue, most privatization proposals include high taxes on wine and spirits, post-privatization. In fact, State Rep. Mike Turzai, one of privatization's chief proponents, produced a spreadsheet this summer suggesting that under his plan, most prices would fall within a dollar of current prices.

Today, Auditor General Jack Wagner announced that an analysis conducted by his department suggests that prices would "inevitably" go up under privatization. From the press release:

Wagner said that the Department of the Auditor General’s analysis concluded that privatization would lead to higher prices on many popular wine and spirits. ... the proposed tax on wine would be the highest in the nation and the 11th highest tax on spirits, inevitably leading to higher prices, Wagner said.

Presumably no one can say exactly what would happen to prices under privatization, but it's pretty clear that if the state offsets a revenue loss with a substantial tax, privatization won't lead to a big discount for consumers unless distributors find a way to either a) dodge taxes or b) operate at a loss.

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