Modifications to Georgia’s alcohol laws will benefit smaller producers, consumers and preserve the system that serves us well

With passage of the 21^st Amendment Prohibition ended and the states became the regulators of alcohol within their borders.[1] The states largely adopted one of two regulatory schemes, “control” or “license.” In the eighteen control states, the state has a monopoly over the wholesaling and/or retailing of some or all categories of alcoholic beverages, such as beer, wine, and distilled spirits.[2] The remaining thirty-two states adopted varying forms of private licensed wholesalers and distributors. With the sole exception of Washington State, all others operate with some varying form of the “three tier” system segregating producer, distributor, and retailer.[3]

States have various exceptions to this rule, the most prevalent one being the case of a brewpub, which is simultaneously a producer and retailer, and has no requirement to sell to a distributor. [3]

Georgia is a “license” state operating under a modified three-tier system permitting some exceptions for brewpubs and farm wineries.[4]

A national telephone survey commissioned by the Center for Alcohol Policy polled 1,000 adults over the age of 21 between August 12 – August 14, 2013 and the results indicate Americans are very satisfied with current alcohol laws and regulations.[5] Eighty-six percent (86%) said it is easy to find a wide variety of beer, wine, and liquor in their community. In fact, there are more breweries operating in the U.S. today than any time in our history. The Brewers Association recognizes 2,483 “Craft Brewers” of the total 2,538 breweries operating as of June 2013.[6]

Georgia’s alcohol regulatory system is working well. Georgian’s benefit by strong brand and aggressive price competition within a system that insures a safe, high quality product while providing an efficient method of tax collection. Yet, industry interests frequently request legislative modifications to the current structure largely in an attempt to benefit smaller producers. Other industry interests fear such modifications detrimental to not only their business, but problematic for the industry as a whole.[7]

How should the state respond? If the current system provides Georgian’s a safe, high quality product, encourages brand and price competition, allows entry into the marketplace for new products, and insures an efficient method of tax collection, what more should the state do?

The state should adopt limited modifications to the current alcohol regulatory system to provide start-up and growing concerns added opportunities to prosper and succeed without unduly harming the long-standing and proven program that is benefiting the vast majority of Georgian’s.

32 oz and 64 oz bottles called
"Growlers" allow patrons to
take locally brewed beer home. 

In as much as brewpubs exist in Georgia as an exception to the established three-tier system[8] operating as a producer and retailer, permitting the retail sale of up to 64 ounces of draft beer, brewed on-site at the brewpub for off-premise consumption is a reasonable modification. Permitting customers that have already entered the business to take a limited quantity of beer home for personal consumption will dramatically affect the profitability of these small businesses without injuring the established distribution and retail system within Georgia. These off-premise sales should be included in the 50% food calculation for brewpubs excluding from the calculation only the quantity of beer sold through the established wholesale distribution system.

Breweries and distilleries are both producers and the state should treat them similarly within the law. Georgia law currently permits “free” tastings at breweries and distilleries in conjunction with educational and promotional tours.[9] The current provisions are largely unenforceable and easily circumvented by breweries and distilleries that choose to serve beyond the legal limits. The legislature should modify Georgia law to permit limited sales for on-site consumption by breweries and distilleries. Permitting breweries and distilleries to sell for on-site consumption during pre-determined “tour” hours would affect, as with brewpubs, the profitability of the smaller breweries and distilleries, build brand identity and demand for their products, without harming the established distribution and retail network, and improve enforcement.

The modifications to Georgia’s alcohol laws suggested here represent a compromise of the various positions advocated before the General Assembly over the past several years. Regulatory change often results in unintended negative consequences; however, legislators must take the initiative to consider in balance the interests of consumers and all industry participants in a changing marketplace.

Brett Harrell represents House District 106 in the Georgia General Assembly. Representative Harrell serves on the House Regulated Industries Committee and is Vice Chairman of the Alcohol and Tobacco Subcommittee. He also serves on the House Budget and Fiscal Affairs Oversight, Transportation, and Ways & Means Committees.

October 28, 2013

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[1]  http://en.wikipedia.org/wiki/Twenty-first_Amendment_to_the_United_States_Constitution

[2]  http://en.wikipedia.org/wiki/Alcoholic_beverage_control_state

[3]  http://en.wikipedia.org/wiki/Three-tier_(alcohol_distribution)

[4]  https://etax.dor.ga.gov/BusTax_Alcohol.aspx

[5]  http://www.centerforalcoholpolicy.org/research-and-studies/

[6]  http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/number-of-breweries

[7]  Alcohol Distribution Laws Bottle Up Options for Consumers and Retailers, Morgan Smith, GPPF, Oct. 2002

[8]  O.C.G.A. § 3-5-36

[9]  O.C.G.A. § 3-5-38 and O.C.G.A. § 3-4-180

County fees exceed county property taxes

I suspected it was only a matter of time and that time is 2013. The weight of the Gwinnett County fees levied against some properties exceed actual property taxes this year. That is right, county property taxes are actually less than the tack-on fees the county assesses against some properties. Of course, one’s wallet and one’s mortgage company cannot tell the difference between a tax and a fee – except that taxes are deductible and fees are not.

Many of you support my effort to remove tack-on fees from our property tax bills (HB 159); the inclusion of fees on our property tax bills is poor public policy period. Economically, the practice tends to hit lower valued properties, perhaps those often at risk of default, the hardest. Non-tax fees consume a higher percentage of the total bill on lower valued properties than high value properties. By increasing monthly mortgage payments via escrow and because of the non-judicial foreclosure statutes in Georgia, including these tack-on fees on property tax bills severely limits a property owner’s ability to stall or avoid foreclosure via negotiations with vendors providing these services.

The result? Freedom is reduced; government grows stronger.

I will continue making the case to remove these add-on fees from your property tax bills. In the meantime, you might support city and county candidates that are willing to do the same.

An old penny for transportation

In my district, as in many, transportation remains an issue of importance in search of innovative and efficient solutions and funding. 

So, why did last year’s proposed one-cent regional sales tax for transportation (TIA) fail in most regions? For some, there is a credibility gap in the “ask” for an additional penny for transportation when we are not spending the penny we already have.

In addition to the Federal Excise Tax of 7.5 cents per gallon of gasoline, Georgia imposes a 4-cent state sales tax (In Gwinnett County an additional 1-cent SPLOST and 1-cent E-SPLOST sales tax brings the total to 6-cents on the dollar). Of the 4-cent state sales tax, the Georgia Department of Transportation (GDOT) reinvests 3-cents into transportation projects. The Georgia General Assembly invests the final 1-cent into other General Fund non-transportation projects. Counties, cities, and school systems invest much of the local sales taxes collected on gasoline into non-transportation projects.

     

              Credit: Baruch Feigenbaum, Transportation Policy Analyst, Reason Foundation

While many of the projects funded with the diverted 1-cent state sales tax on gasoline may be worthy of investment, robbing Peter to pay Paul has rarely proven a successful long-term financing strategy. Sound public policy would suggest investing those funds generated through transportation spending back into transportation system maintenance and improvements a better choice.

Baruch Feigenbaum, Transportation Policy Analyst with the Reason Foundation recently recommended to attendees at a Georgia Public Policy Foundation transportation luncheon that Georgia do just that by reclaiming the fourth cent of state sales taxes collected on gasoline. Mr. Feigenbaum’s presentation is available here. 

Although unaware of HB 648, I was pleased to hear Mr. Feigenbaum’s arguments in favor of reclaiming that old penny as I introduced legislation last session (HB 648 co-sponsored by House Transportation Committee Chair Jay Roberts) to begin reinvesting those funds into transportation. HB 648 would return ¼ of a cent each year beginning in fiscal year 2016 through fiscal year 2020 to GDOT. Initially about $40 million a year and once GDOT reclaims the full one-cent approaching $200 million a year in additional transportation dollars.

Can we afford it? I believe so. In my three years as a member of the Georgia House, our state budget has grown from $18.3 to $19.9 billion (remaining well below the pre-recession peak of approximately $23 billion). Recent revenue numbers exceed the Governor’s projections and indications are our state economy is slowly strengthening. Rather than allow new spending to consume revenue growth or battle over cuts to programs currently funded by the diverted penny, allocating a small percentage of returning revenue growth to reclaiming that old penny may go a long way toward improving our mobility, reducing congestion, encouraging business growth, and providing the quality of life all Georgians desire.

Brett Harrell represents the 106th House District in the Georgia General Assembly that includes portions of Grayson, Lawrenceville, Loganville, and Snellville. He is the former Mayor of Snellville and former Executive Director of the Evermore Community Improvement District. Mr. Harrell serves as Vice Chair of the House Budget and Fiscal Affairs Oversight Committee and as a Member of the Regulated Industries, Transportation, and Ways and Means Committees.

It is legal – just un-American

I had another enjoyable opportunity to hear U.S. Congressman Rob Woodall speak recently at the Snellville Commerce Club lunch (a group of local business owners – most small businesses). The Congressman suggested our ire ought not be focused on the National Security Administration (NSA) for “spying” on Americans, rather, the U.S. Congress and President that enacted the law making their activities legal. He said the agency reports each year to Congress their activities and findings so our elected representatives knew or ought to have known of their actions. Therefore, the activities are legal, but legality does not necessarily mean wise or prudent. The same is true regarding the Patient Protection and Affordable Care (PPAC) Act or “Obama Care”. It is the law of the land upheld by our highest court. It is legal; however, many would agree that a government take-over of nearly one sixth of our economy is anathema to our nation's free enterprise system.

For the past several years, I have been advancing an argument at the Georgia General Assembly that would prohibit local governments from billing non-tax fees on your personal ad valorem tax returns. Never have I suggested the practice was illegal – the Georgia Supreme Court has now confirmed it is legal; however, I do believe such an assault on one’s private property in the name of efficient government is unjust.

Recent local news reports several school systems, including Gwinnett County Public Schools, are installing cameras on school buses to aid in enforcing traffic laws. In as much as the school systems do not have traffic enforcement jurisdiction, local governments are necessary partners. Again, the legality is not in question; however, this is yet another encroachment by government into our lives at the same time creating a time and money distraction from the core business of school systems to educate our children. Yes, it is legal, but should governmental agencies continue the installation of cameras monitoring our every move?

Perhaps the most egregious to me, local news reports that Gwinnett County Police have unwillingly strapped one hundred citizens to a gurney, placed them in a headlock, and forcefully withdrawn their blood based on a Magistrate’s warrant to aid in securing what is most often a misdemeanor driving under the influence conviction. Yes, it is legal – just un-American.

Most would agree we must have a safe and secure national defense and providing a healthcare safety net for our poor and disabled is without question. Efficient government operations and citizens that pay their bills is required of all in a civil society. We all desire a safe environment to, from and during school for our children, and DUI’s are a serious offense. That said, our nation has grown and prospered in large degree because government has remained relatively limited in our lives. In my view, each of these seemingly well-intentioned government intrusions are rapidly moving our nation over the tipping point where government will dominate our lives and that most certainly is un-American.