News Story

Analysis: This Time It’s Liquor Distribution

It's hard to imagine how the current state liquor distribution system could be made worse, but according to MIRS News, Gov. Jennifer Granholm has discovered a way. She apparently wants to make this partial monopoly into a complete one, selling the lucrative privilege to just one outfit. 

Worse, the monopoly would be granted for 25 years in return for a lump sum payment, all of which would be spent in less than one year to avoid needed budget cuts.

In other words, Gov. Granholm and current legislators would steal 25 years worth of license revenue from future taxpayers so that they can slip out of town with a budget that ruffles a few less special interest feathers.

"Immoral" is not too strong a word for this. That goes for other recent examples of Michigan's political class stealing from future citizens and taxpayers, as described here and here.

By the way, the current state-controlled liquor distribution system is a monstrosity. In 1997, then-Gov. John Engler and the Legislature botched an attempted privatization of the previous state-owned system. The good news was that several hundred state positions were eliminated, along with the growing pension liabilities they accrued every year.

The bad news was that these were replaced by a price-controlled oligopoly in which a handful of private distribution companies (called "ADAs") were given exclusive licenses to distribute liquor to the retail and hospitality industries.

This was good for the privileged members of that cartel, and good for the politicians who collect rich campaign contributions from them, but bad for consumers, bars, restaurants, the tourism industry and even the Department of Treasury revenue division. Why the Treasury too? Because the lack of competition generates higher prices and lower volumes than would otherwise be the case (or alternatively, lower tax revenues than if the savings from a more efficient system were taxed away).

Here's a better idea: Shut the entire state-controlled system down and let the private sector handle this function, with prices set by competition. Those concerned about the moral effects of liquor consumption can still impact it through the very staightforward mechanism of an excise tax.


Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.