Alcohol

Politicians Make Bootlegging Great Again

Prohibition may be over, but high taxes and stupid restrictions create plentiful smuggling opportunities.

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When Prohibition ended in 1933, my great-grandfather, Giuseppe Marano, thought his money-making glory days were over. Having made a good living selling alcoholic beverages to willing buyers at a time when that business was illegal across the country, he and his cohorts certainly viewed the passage of the 21st Amendment as the end of a very profitable era.

Except that it really wasn't. Politicians may have formally dumped the national ban on booze, but in many places they've imposed enough foolish restrictions to keep bootlegging a going concern.

On the first day of this year, it became a class 4 felony in Illinois—up from a business offense carrying a fine—to import 45 liters or more of liquor into the state without a license. The same minimum one-year prison sentence applies to bringing in more than 108 liters of wine or 118 liters of beer without government paperwork.

The law passed as a nudge-and-wink scheme between politicians who resent the loss of tax revenue when beverages are brought in across the state line, and local liquor distributors who bristle when out of state competitors elbow in on their action.

"Many out-of-state businesses are not compliant with Illinois tax laws, which undercuts Illinois businesses, depriving our state of money that could be going toward improving our schools, roads and social services," Karin Lijana Matura, executive director of Wine and Spirits Distributors of Illinois, an industry trade group, told WQAD.

The legislation came in response to a thriving illegal cross-border trade as Illinois residents place orders with businesses—many in Indiana—for liquor, wine, and beer unavailable or just extremely pricey through their state's tightly regulated and protected cartel.

"Alcohol is much more expensive in Illinois than it is in Indiana," reported a Chicago ABC affiliate in 2015. "And it is even pricier in Cook County, where the tax rate on liquor is more than five times higher than it is in the Hoosier state." The result is that "a six-bottle case of vodka that costs $167 in Indiana costs $226 in Illinois and is $18 more than that in Cook County."

Indeed, Illinois taxed distilled spirits at $8.55 per gallon, compared to the $2.68 imposed by Indiana, according to the Tax Foundation. Taxes are also lower in neighboring Missouri and Wisconsin. The Illinois Policy Institute notes that Cook County adds another $2.50 per gallon to the price of a bottle of cheer, and Chicago tags on an extra $2.68 per gallon.

Wine is taxed at $1.39 per gallon, a tad higher than the $0.25 rate in Wisconsin. Beer isn't leaned on quite so heavily by the tax man, but Illinois still imposes a higher rate than most of its neighbors at $0.23 per gallon, compared to $0.12 in Indiana, and $0.06 in Missouri and Wisconsin.

And that's assuming you can even find the beverage of your choice to have an opportunity to balk at the price. Chicago "is one of the last contested territories for the nation's two beer giants…which wage a proxy war through licensed distributors" and squeeze out small competitors, Crain's Chicago Business pointed out a few years ago. Federal and state law makes it difficult for small players to bypass established distributors.

So opposition to the new Illinois law found fertile ground among consumers with tastes that couldn't be satisfied locally, "particularly from residents who purchased hard-to-find wine from out-of-state retailers," according to the Chicago Tribune. "Other states allow out-of-state retailers to obtain a direct shipping license, providing both oversight and valuable tax revenue. We think this is the right approach for Illinois—creating competition, consumer choice, and revenue to help balance our state's budget," their petition said. All they wanted was a chance to legally place orders online with businesses that carry their drinks of choice and have the goods shipped to their homes. But they lost, and the tax man and distribution cartel got their pet bill signed into law.

It's not as if Illinois officials are alone in favoring tax revenues and established local businesses over the value of leaving people free to make their own choices. This year, Michigan adopted a law allowing state retailers to ship wine directly to customers—but barring businesses based outside the state from serving the same market. That's a direct blow not just to retailers who don't have local politicians in their pockets, but also to consumers who want to take advantage of the boom in online vendors and wine clubs of recent years.

And the motivation is no mystery.

"We applaud the House for approving this legislation, which will provide the state with additional tools to crack down on illegal wine shipments into our state," the president of the Michigan Beer and Wine Wholesalers Association crowed.

"It sounds like it's going to shut down some of these mail order wine clubs, which if those people can't get their wine through those streams anymore they'll have to come to places like this," the general manager of a Traverse City retail operation told 9&10 News.

Unshockingly, Michigan has generally higher taxes—$11.94 per gallon of distilled spirits, $0.51 per gallon of wine, and $0.20 per gallon of beer—than its neighbors. The state also imposes an alcohol regulatory regime that the Mackinac Center for Public Policy calls "problematic, because it is designed to unjustly enrich a few beer and wine wholesalers at the expense of consumers everywhere. Indeed, parts of the state liquor code read as if it were written specifically for the benefit of wholesaler business interests."

With high prices essentially mandated by law, Michigan has long enjoyed a healthy, if officially unsanctioned, cross-border trade in alcoholic beverages.

"Conservatively, illegal importation of alcohol into Michigan strips the State of at least $14 million each year," the Michigan Liquor Control Commission estimated in 2007. The Commission fingered Indiana and Wisconsin as major sources of smuggled alcohol—both states, it should be noted, with lower tax rates on all sorts of adult beverages.

Foreshadowing Illinois's transformation of a business offense into a felony ten years later, the Michigan report recommended increased enforcement and penalties as the response to state residents seeking to avoid repeated muggings by government officials and their cronies. Why correct your own foolish errors when you can lash out at people for responding rationally and predictably to the incentives you've created?

Giuseppe Marano had his day. But if he were still around, he would recognize a glorious business opportunity when he saw it in the legal, but heavily taxed and regulated modern booze market.

But it's not like that market I going unserved. My great-grandfather may be gone, but there are plenty of modern bootleggers profiting from the opportunities that politicians have handed them.

NEXT: Donald Trump vs. the Deep State: Matt Welch on Tonight's Kennedy

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  1. From WaPo: “President-elect Donald Trump said in a weekend interview that he is nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody,” while also vowing to force drug companies to negotiate directly with the government on prices in Medicare and Medicaid.”

    Awesome! You go, Eugene Debs. Maybe I made a mistake in thinking Trump was a total fucking dickbag.

    1. Go push your racist bigotry against Asian people elsewhere, you vile piece of shit.

      1. To be fair, he’s racist against Semitic and African peoples as well.

        1. I heard he is racist against Italians and Greeks, too! But, I also heard he has a soft spot for the Irish!!………….Will the Brits like that?! The biggest risk would seem to be for the Phillipinos! They’re a real hodgepodge!

          …………(;-P………..

  2. so, it’s come to this… I thought libertarians were the brave and radical truth tellers of American politics willing to break free of the shibboleths of American political power. And now, I’m left figuring out that what libertarianism means is bitching about Obama and Kids on the college campuse today. What a letdown! I’m sad.

    1. I’m sad.

      Pathetic or imbecilic would be the words I would use, but yeah, you are pretty sad.

    2. I’m left figuring out that what libertarianism means

      I can’t imagine how difficult your life must be. To go through life that stupid. It must be horrible. I pity you.

    3. I’m left

      No shit?

      1. Plenty of it. Plenty!

    4. since when is Trump a Libertarian?

  3. There’s never been a socialist yet who wasn’t an out and out slaver.
    Nobody else’s preferences or decisions matter, they are the final arbiter of what’s good and true and right and *must be made to happen no matter the cost or consequences*.
    Apparently, unlike the rest of us, they don’t make mistakes, never change their minds, and, well, approve of treating others as chattel.
    Deeply, deeply contemptible.

    1. See the self-described example at the top of this thread.

    2. It’s the magical power of good intentions.

  4. depriving our state of money that could be going toward improving our schools, roads and social services,” Karin Lijana Matura, executive director of Wine and Spirits Distributors of Illinois

    illegal importation of alcohol into Michigan strips the State of at least $14 million each year

    If you’re depriving the state of their fair share, you’re just plain evil. The whole purpose of your existence is to serve the greater good and the needs of society as embodied by the state and denying that tenet of the faith is not just wrong but a dangerous heresy designed to seduce and corrupt the innocent sheep.

    1. of course no one asked why schools, roads, and social services are funded by an alcohol tax.

      1. Because other sins were already taxed. Duh

    2. Falk’s Thirty-Third Law:

      “The Only Criterion for putting a Tax on something is that the “something” must be Measurable. No other reason is necessary.”

      You will never find any other explanation which explains so rationally and succinctly why anything is taxed.

      If it can be measured, it’s a target for someone in Government to find a justification to tax it.

      Remember the Boston Tea Party? “Taxation Without Representation”?
      Now consider the Inheritance Tax. [a.k.a., “Estate Taxes”] …
      If that’s not the ultimate “Taxation Without Representation,” what is?

      You really needed that explained to you?!

  5. One might almost think that thee was a secret ceremony for all politicians winning office, in which they received a partial lobotomy.

  6. “It sounds like it’s going to shut down some of these mail order wine clubs, which if those people can’t get their wine through those streams anymore they’ll have to come to places like this,”

    Like dinosaurs building a shelter to protect them from the meteor…

  7. The thing about schemes like these is they have no effect at all on the behavior of determined consumers. Barring the construction of customs posts at state borders, or checkpoints where incoming cars are randomly stopped and searched, the only thing they will accomplish is giving the normally timid a chance to experience the little thrill that comes from getting away with something at the government’s expense. And really, the more people who start understanding the pleasures of saying “fuck you” to the state, the better.

  8. “Many out-of-state businesses are not compliant with Illinois tax laws, which undercuts Illinois businesses, depriving our state of money that could be going toward improving our schools, roads and social services,” Karin Lijana Matura, executive director of Wine and Spirits Distributors of Illinois, an industry trade group, told WQAD.

    Fucking maps- how do they work?

  9. Chicago sucks and it is going to be the Detroit of the 21st Century. Crime is already spiking and if it starts to really infiltrate the wealthier white neighborhoods in North Chicago, we’re going to see white-flight -> massive urban decay all over again.

  10. So, given Hollywood trends, how long before we get a remake of Smokey and the Bandit? And which car will be used by the Bandit as a blocker?

  11. I’ve never thought of it before, but how much bootlegging goes on in Cook county? Especially in bars.

    Doing some back of the envelope calculations based on the case of vodka mentioned above, you can save $77 off each case of vodka you buy in Indiana, so say you rent a U-haul, and assuming you buy 25 cases of vodka, you would save $1925 with just one trip.

    To me, that seems to be a powerful incentive to smuggle booze from out of state.

  12. Boo hoo. Come to Pennsylvania, we’ll show you what dumb ass alcohol laws really look like.

    1. New Hampshire> adds no additional taxes to alcohol. Just sales tax.

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  14. Back in my college days in Memphis we used to smuggle cases of Coors over the bridge from Arkansas for Bootleg parties. We thought we were so badass.

  15. Thank goodness Chicago is conveniently located between Indiana and Wisconsin. I plan to give the good people of Kenosha even more of my business, while I count the (thousands of) days I have left until I can retire from my big-city job with big-city pay and move far away from the buffoonery that is Illinois. I’m hoping if I time it right I can get out and sell the house to some sap right before things go tits-up for real, and everybody left in Illinois is stuck with a tax bill that makes today’s look like chump change. I’m not saying Illinois isn’t already in a mess, but give it 10-15 years when the really big sweetheart pensions kick in.

  16. Government as god.. dontchya love it?

    So, Illinoisians short circuit government theft by simplyt buying outside of their turf, and now the pore widdow revenooers got their knickers all knotted up? Too bad.

    They claim they “get cheated” out of $14Mn/year by “bootlegging”,

    “Many out-of-state businesses are not compliant with Illinois tax laws, which undercuts Illinois businesses, depriving our state of money that could be going toward improving our schools, roads and social services,” (quoted)
    From what I know of those “targets” for tax spending, they’re short a whole lot more than $14Mn/year. ALL those systems are in a shambles, $14Bn might be closer… but where does revenue collected actually GO? Someone needs to answer that one. But wont. Nothing short of scam to protect the few and chosen distributors.. almost all of which are direct descendants of the former bootleggers and moonshiners from Prohibition. Theyr turf wars paid off when booze went legal again, and they still fight teir turf wars, except these days by buying favour from politicians.
    Illinois… rotten to the core.

  17. Same thing goes on in Washington State. After decades of the state being in the liquor business, tightly controlling every aspect of it, Costco filed suit… and lost. Then they drafted a Citizens’ Initiative to remove the state goernment from the liquor business. Lying powerbrokers spent millions and narroly defeated it. Costco came back with a different Initiative, this time they were ready and proactive. It passed wiht a landslide. Problem, the booze cops (Liquor Control Board) put together an outrageous tax scheme, likely the highest in the nation. I simply quit buying liquor or wine in my home state. No laws like this one, yet, here, but you wait…. they’re watching and scheming. There WILL be a criminalisation before long.
    Difference? Costco sell a particular house brand vodka, drikable stuff, inside Washington its $38.xx per 1.75 litre bottle, or $228 the case of six. that identical item number purchased in California is $16.xx the bottle, $98 the case. Savings of $130… on ONE box of booze. Spending the cash is one thing… supporting the corrupt state bureaucracy is the real reason.

    1. and then, two years later, a different citizens intitiative legalised marijuana for “recreational” use (medicinal had been legal for some time). the booze cops, still miffed and with a burr under their saddle blanket, somehow got control over the weed distributioin system. After a functional and reasonable medical distribution system, they went crazy on the personal use category.. a triple tier tax system adding many times shelf price, restricted licencing (much like taxi medallions) and turf, expensive inspections and lab tests, etc. I remember the days when a “dime bag” was a full ounce for ten bucks. these day,s a ten dollar gramme is a bargain… and likely not good. Now, this last year, they’ve driven out most of the medical producers by bringing THAT part of production under their heavy thumb as well.

      Funny thing, they’ve added so much to the price by taxes, they’ve forced the former bootleg blackmarket to come back with a vengeance…. so once more Laffer’s Curve (look it up) dictates a reductioin in tax revenue from that expected. Behaviour has changed. I don’t use the stufff, and don’t intend to, but I watch it… its amusing. government as god trying to modify and dictate over millions of private trade transactions and failing miserably is fun to watch.

  18. “Prohibition may be over, but high taxes and stupid restrictions create plentiful smuggling opportunities.”

    It’s a good article, but it certainly isn’t news – switch the topic from “alcohol” to “cigarettes” and you’ll find that alcohol prohibitionists have some catching up to do if they want the same level of absurdity.

  19. Now that it’s a criminal penalty I see a restriction in commerce lawsuit being filed almost immediately.

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  22. I will continue to assert my white privilege and buy my booze in Delaware!

  23. I’m so sorry for your loss. Thank you for sharing a bit of yourself. Be Blessed.
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    Of course your are right. We say stupid things to people who are grieving because WE are hurt by their hurting. We can do so much to be helpful if we can learn to tolerate the pain of another and just sit with them.

  24. Bootlegging never went out of style in this country. In fact it’s been kept alive and well by the prohibition of other drugs.

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