The Inigo Montoya Alcohol Report

“You keep using that word. I do not think it means what you think it means.”

The word in this case being not “inconceivable,” but “revenue.” Yesterday, Comptroller Peter Franchot held an event to tout his new “report” about all the “revenue” that will be gained by doing away with Montgomery County’s alcohol monopoly. I kept hearing Inigo Montoya’s voice over and over again as I read the report and watched Franchot’s press conference. Franchot and other “reform” advocates like Delegate Bill Frick are acting without apparent concern for the financial and economic well-being of the county. Either they don’t know what they’re talking about or they’re not telling the whole truth. Neither one being a stupid guy, I’ll let you draw your own conclusion. Here’s some facts to help you out.

First off, the “report” was done by Franchot’s own staff. Make of that what you will. More importantly, the “report” sets forth a series of assumptions and then makes calculations about the revenue bonanza that will happen if those assumptions come true. How good are the assumptions? No idea - they didn’t bother to justify them other than by stating - another assumption - that the entirety of the lower alcohol consumption in Montgomery County is due to the evil monopoly. How good is that assumption? Pretty crappy as a matter of logic - how often is any observed variance due solely to one factor? Pretty much never.

But let’s put aside our qualms about the assumptions in the “report.” If all the unicorns and puppies come to fruition, the “report” claims that 1,364 jobs will be created by 2021 (principally in the wholesale liquor industry, which we’ll come back to in a bit), with a net increase in economic activity of $193.4 million. The “revenue” to the state and county will be $56.5 million. That sounds good, doesn’t it?

No, not at all. That’s over four years. So it’s $14 million per year. Remember, the terrible monopoly generates $35 million per year in revenue to the county, right now. That doesn’t include the income taxes paid to the county and state by the workers at the county facilities, nor does it include sales taxes, and excise taxes paid by consumers at Montgomery County liquor outlets as we speak. All of that will go up in smoke, and should in any reasonable projection be counted as an offset. But it isn’t, because the department doing the “report” works for the guy advocating for change.

Second point: talking about revenue to the “state and county” is an obfuscation of the highest order. How much to the state and how much to the county? It’s in there, but neither the Comptroller nor Bethesda Magazine wants to focus on it. Of the $56.5 million in revenue generated by the unicorns and puppies, a whopping $4.28 million will go to the county. Yes, you read that right. Even under the most rosy, “sure, go ahead and piss on my leg and tell me it’s raining” scenario that the Comptroller could concoct, the county’s $35 million in revenue under the current arrangement will be reduced to just over 1 MILLION DOLLARS (ooh, another chance to drop in a movie reference) per year. The state, on the other hand, will garner a nice windfall of $52 million, or around $13 million per year.

There’s more, but you get the idea. What this pie in the sky “report” does, taken on its own terms, is to effect a massive revenue transfer from the county to the state. Maybe somebody should ask why that’s a good idea at a time when the state has an over $700 million surplus, while the county is looking at property tax increases in order to keep pace with its current obligations as a result of the Supreme Court’s decision in the Wynne case and lagging revenues from real property transactions and income tax returns. Plus destroying over 300 middle class jobs that already provide a significant amount of revenue right now.

Final point: Delegate Frick is quoted in the article as follows:

“I think there’s a lot of support from the public, from consumers, from voters,” Frick said. “They need to let their opinions be heard because if all the members are hearing from are special interests, that’s a skewed vision.”

I guess by “special interests” Frick means “labor unions.” What a terrible thing they’re doing - fighting for their members’ jobs and the interests of the county. I’m looking forward to Frick swearing off any labor endorsements in his next campaign. As if. Better question: will any labor union continue to endorse him now?

Curiously absent from those who Frick believes might have an interest in this fight is the liquor industry. Look back again at Franchot’s charts. There’s a lot of growth in jobs in the liquor industry - with those jobs come increased sales, and increased profits. But they’re not “interested”? Intriguing.

Stay tuned. This is only going to get more interesting as we move forward.

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