Freedom in the 50 States

An Index of Personal and Economic Freedom

Alcohol Freedom

The alcohol category includes restrictions on distribution, taxes, blue laws, keg registrations, and “happy hour” bans.
Choose a dimension of freedom below to see rankings on the map, or use the map to explore results by state.

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Alcohol Freedom

The alcohol distribution system (“control,” which means the state has a monopoly on distribution, versus “license,” which means the state licenses distributors) makes up almost 1.0 percent of the whole index on its own. Research shows that state distribution of alcohol imposes significant costs on consumers in time and inconvenience.1

The freedom index assumes a “full-price elasticity” (including formal and informal prices) of −0.2 for all alcohol types, which is similar to what has been discovered. Reducing consumption of alcohol by 5 percent with a state monopoly, according to University of California, Los Angeles professors Stanley I. Ornstein and Dominique M. Hanssens, therefore implies a 25 percent “tax” due to transaction cost. According to the U.S. Department of Agriculture, packaged alcoholic beverage sales in 2010 amounted to $91 billion. If all such sales had to go through state monopolies, then one might expect a transaction-cost “tax” of close to $23 billion.2

Blue laws (bans on Sunday sales) would, if implemented nationwide, reduce consumer welfare by over $4.5 billion. Preventing wine, spirits, or in a few states even beer from being sold in grocery stores has a similar cost. Taxes on beer, wine, and spirits each make up a similar share of the index, followed by direct wine shipment bans, keg registration and bans, and “happy hour” bans. Mandatory server training, worth less than 0.01 percent of the index, rounds out this category.

Although some observers advocate strict regulation of alcohol to protect people from hurting themselves, the reality of these policies is that they are often driven by special interests, from the high spirits taxes in wine-producing states like Oregon and Washington to high wine taxes in spirits-producing states like Kentucky, to convoluted and possibly corruption-prone rules for getting licenses to sell wine in states like Maryland, Massachusetts, and New Jersey.

With its strong brewing industry, Wisconsin finishes first in this ranking. With its stricter and unique liquor laws, Utah finishes last.

Footnotes

1. Stanley I. Ornstein and Dominique M. Hanssens, “Alcohol Control Laws and the Consumption of Distilled Spirits and Beer,” Journal of Consumer Research 12, no. 2 (1985): 200–13.

2. Björn Trolldal and William Ponicki, “Alcohol Price Elasticities in Control and License States in the United States, 1982–1999,” Addiction 100, no. 8 (2005): 1158–65. Our comparison here is from minimum to maximum values for this variable.