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Liquor System Revenue Calculator


State lawmakers are debating whether to sell, or privatize, the state’s liquor store system. What might that mean for you and other Pennsylvanians? In fiscal year 2009-10, the current state-run liquor store system provided $397 million in total benefits to the Commonwealth (excluding state and local sales taxes), which funded programs that serve you and your neighbors. By adjusting variables associated with this proposal, the McCord Treasury’s Liquor System Revenue Calculator lets you see for yourself how much revenue the state would need to receive from one-time sale proceeds, alcohol sales and taxes in order to equal what the current system generates.
Step 1:
Decide how much of the proceeds from a one-time sale of the state liquor control system the Commonwealth would retain for investing.
Explain this
Sale Proceeds
Step 2:
Decide what rate of return those invested funds could earn.
Explain this
Interest Rate
That investment would generate this annual revenue.
Interest Income
Step 3:
Assume future annual sales volumes, expressed as a percentage of sales in FY 2009-10.
Explain this
Future Sales as % of Current Sales Explain this
Future Sales (gallons) Wine
Liquor
Total
Step 4:
Determine tax rates to impose on each gallon of wine and liquor sold (excludes sales tax). Explain this
Gallonage Tax Wine
Liquor
Ratio
Those tax rates would generate this annual revenue from alcohol sales. These results assume that sales taxes would remain relatively constant under a privatized system. Some privatization proposals call for altering the sales tax structure
Revenue From Gallonage Tax Wine
Liquor
Total
Calculator Revenue:
Based on the factors you entered, the Commonwealth would generate this amount of total annual revenue. This amount includes gallonage tax revenues and interest earned from the invested proceeds of a one-time sale.
 
Current Revenue of Existing State-Run System:
Explain this
 
Difference:
How does your total compare to the $397 million the Commonwealth receives under the existing state-run system?
 
close help Some reports estimate that the sale of Pennsylvania’s liquor system may generate anywhere from $500 million to $2 billion. Treasury has not placed a value on the system, nor does it endorse any of the estimates that have been published. The Calculator allows you to decide how much money from sale proceeds the Commonwealth could retain for long-term investments to generate annual revenues (as opposed to being spent by the state to pay current expenses).
close help The default annual rate of return is set at 4%, a reasonable assumption in today’s financial environment for a highly safe investment that is expected to provide reliable income to the Commonwealth each year. The Calculator allows you to change this default rate depending upon how conservative – or optimistic – you believe the initial assumption to be. The Calculator does not calculate compounded earnings, assuming that any gains realized will be spent annually by the Commonwealth rather than reinvested over the long-term.
close help The Calculator’s default values represent approximate purchases, in gallons, for FY 2009-10 because the Pennsylvania Liquor Control Board reports in terms of units of alcohol – not volumes – sold. As a result, the Calculator’s default values were based on a conversion from actual units sold to volumetric sales.
close help The Calculator enables you to adjust future sales as a percentage of the default figures, while maintaining the wine to liquor sales ratio.
Based upon the ratio of FY 2009-10 revenue to alcohol sales volumes, the Commonwealth currently imposes an effective per gallon tax rate of $11 (assuming the same rate is charged for wine and liquor). The Calculator's default tax rate of $9.12 per gallon maintains revenue neutrality (in light of the other default assumptions) with the amount that the state-run system generated in FY 2009-10. The Calculator allows you to adjust the per gallonage rate separately for wine and liquor.

While Pennsylvania does not assess a gallonage tax under the current state liquor system, it does impose an 18% state liquor tax on sales price (aka the Johnstown Flood Tax), which is the equivalent of a $7.51 per gallon tax. The table at right compares that tax rate to what is imposed in neighboring states.
  close help 
Alcohol Tax Rates
  Spirits Tax(Per Gallon) Wine Tax(Per Gallon)
Washington D.C $1.50 $0.30
Delaware $5.46 $0.97
Maryland $1.50 $0.40
New Jersey $5.50 $0.88
New York $6.44 $0.30
Ohio $3.00 $0.32
PA* $7.51 $7.51
West Virginia ** $1.98 $1.00
Neighboring states average $3.63 $0.60
*Estimated equivalent per gallon tax rate to equal 18% tax on both wine and spirits. Does not include transfer of profits or operation transfers
**Estimated equivalent per gallon rate of 5% tax rate on liquor. West Virginia has a gallonage tax on wine
Sources: Tax Foundation, PA Treasury
close help The Calculator’s default is set at $397 million, the total benefit Pennsylvania realized from the transfer of liquor taxes and Pennsylvania Liquor Control Board profits to the Treasury, as well as from operational transfers to other state agencies, in Fiscal Year 2009-10. This figure does not include some nominal transfers to other state agencies, or regular state and local sales taxes collected on wine and liquor purchases that generated another $112 million.
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