A Status of the United States Alcohol Sales - Example

Wet/Dry: A Status of the United s Alcohol Sales Introduction Traditionally, the United s has implemented a total prohibition with regard to buying and selling of alcoholic beverages; however, the government perception about the prohibition was changed during the beginning of the 20th century. Today, the alcohol industry in the U.S. is treated in different manners wherein some communities are conservative while some are against the prohibition. The conservative community does not want to legalize the selling of alcoholic drinks in the market because it could cause social and economic problems brought by unpleasant behaviors (Dull & Giacopassi, 1988). Also, they argued that this is not the only solution left to improve the economic status of a county and remain competitive. This issue has been debated in the U.S. since the 1990s, which has led to different social movements and the approval of the prohibition. However, it was only in the early 20th century that this regulation has been reviewed and reconsidered; in fact, almost all counties are giving their people an opportunity to vote in the wet/dry referendum. The main thrust of this paper is to discuss the alcohol wet/dry issue in terms of tourism, revenue, and economic impact, particularly in the United States. 2. Alcohol Wet/Dry It was in the late 1990s that the total prohibition on alcohol consumption was eliminated. However, every county in the U.S. was given equal opportunities to regulate the alcohol sales market; hence, there is no exact description about the dry/wet issue because individual states have their own understanding of the term (Wheeler, 2012). Those counties in a state that restricted the distribution of alcoholic beverages anywhere and anytime in their communities are known as “dry” (not legal) while those, which have totally or partially allowed alcohol consumption, are called “wet or moist” counties. Nowadays, alcohol analysts have commented that economies of dry counties are not competitive in today’s rapidly changing and highly competitive environment (Hampson, 2010). They have argued that the total prohibition of selling alcoholic beverages has something to do with this problem. Table 1: Dry and Wet Counties Source: Hampson (2010) Table 1 above shows the number of dry and wet counties in the major states of America. The data have illustrated that dry counties are moving towards the amendment of policy in favor of the wet initiative, which is to legalize the distribution and consumption of alcoholic drinks. 3. Tourism In the 21st century, most of the countries worldwide have been investing in tourism activities considering that these have a positive impact on economic performance, particularly to the GDP (Organisation for Economic Co-Operation and Development [OECD], 2010, p. 88). Furthermore, it is perceived as the economic breadwinner of both developed and developing nations considering that it is today’s most rapidly growing industry and world’s largest export earner (Harrison, 2007, p. 61; Higgins-Desbiolles, 2006, p. 1192). In fact, the tourism industry is one of the largest industries in the United States in terms of employment profile, tax revenue, and spending pattern of travelers (Milne & Backhausen, 2003, p. 8). The growth of the U.S. tourism industry is closely related to other industries including the alcoholic drinks industry as a peripheral service (Buglass, 2011). Hence, being a dry county (total prohibition) could restrict inbound and drink tourists, and decrease personal consumption expenditures. Figure 1 below shows a decrease in consumption expenditure that shifts the demand (D) curve to the right from D1 to D2, causing a new equilibrium for price (P1 to P2) and quantity demanded of real GDP from Y1 to Y2. Figure 1: Consumption Expenditure vs. GDP On the other hand, it was also during the prohibition period that the level of crimes, health-related problems, explosions, and anti-alcohol protests in the U.S. has been increased (Knight & Martinez-Vergne, 2005, p. 245). Thus, tourists are not attracted to visit the country, and they often looked for other tourist destinations wherein transfer, consumption, and selling of alcoholic beverages are not restricted. For instance, the Tourism Commissioner of Marshall County said that most of the time, tourists are asking “where can I have a drink? Where can we buy alcohol?” (Norwood, 2012). However, because they are dry counties, they usually lost the opportunity of generating economic activities through the demand of alcoholic drinks. 4. Revenue For many years, the U.S. international tourism sector has delivered a surplus in trade activities wherein the inbound market (i.e. Europe, Asia, North & Latin America, etc.) is the highest contributor compared to outbound and domestic visits. Furthermore, this segment has contributed a total of “69,500 job opportunities... [and] $99 billion as tax revenue in the year 2004” (“US Tourism Industry,” 2010). Today, the slow growth of the U.S. GDP is accounted to the lower revenue of the economic output and spending behavior of people. In the new century, government authorities of various counties have been attractive to the revenue brought by the selling of alcoholic drinks. In fact, “alcoholic was averaging $189 billion a year in revenue” (Black, 2010, p. 82). On the other hand, this revenue trend would continue for a longer period of time considering that tourists and travelers have increased their consumption on beer, wine, and many more. Furthermore, the total tax revenue in the U.S. by county for the third quarter of 2011 is shown in figure 2. Figure 2: United States Tax Revenue: Alcoholic Beverages Source: “United States Tax Revenue” (n.d.). On the other hand, several states in the U.S. have “raised taxes on alcohol or changed alcohol laws to increase revenue…” (Severson, 2011). Government authorities have decided to increase the sales tax because they wanted to discourage people from buying alcoholic drinks and by making the latter unattractive in terms of price. However, alcohol analysts have perceived that the issue behind this decision is for the government to take advantage with the increasing and inelastic demand of alcoholic beverages in the market (Newman, 2012). Figure 3 below is the effect of raising taxes on the aggregate demand (AD) and short-run aggregate supply (SRAS). As the government implemented the increase of tax, the aggregate demand (AD) curve shifts to the left from AD1 to AD2 because the level of consumer spending or purchasing power is weakened. Hence, the real GDP will decline from Y1 to Y2 including the level of price. Furthermore, the figure illustrates the shifting of the SRAS to the left from SRAS1 to SRAS2 when sales taxes on alcohol are raised. Moreover, the decision could result to a higher unemployment rate and declining level of savings and investment as consumers and businesses are discouraged to save and invest. Figure 3: Raising Sales Tax on Alcoholic Beverages 5. Economic Impact According to Wheeler (2012), Americans have different perceptions about wet or dry; however, it seemed that the 51 states are becoming more and more attractive to the legalization of alcoholic beverages (wet), either fully or partially. In fact, the cancellation of the prohibition in the U.S. market was considered as a growth opportunity for businesses to maximize sales and market share through the enhancement of alcohol commercial activities (Knight & Martinez-Vergne, 2005, p. 245). Moreover, local authorities believed that the decision would improve the attractiveness of the U.S. labor force. This argument is also supported by most alcohol analysts wherein they have encouraged dry counties to going fully wet; this is to partake on the positive economic impact if alcohol is not banned. Furthermore, the legalization of selling, consuming, and importing alcoholic drinks would improve the tourism industry; thus, restaurants, hotels, clubs, and other hospitality ventures would be encouraged to place an investment. In addition, these establishments would create more local jobs and higher tax revenue for the government. There are also instances that international companies would make the issue about wet or dry as one of the important criteria before they would invest (Norwood, 2012). Thus, the economic impact, as well as the competitiveness, has encouraged many dry counties to become wet. On the other hand, there are groups of Americans, who have argued that the revocation of the prohibition is not the only and the final solution to gain economic prosperity. Furthermore, it is not a radical resolution to any social or economic issues, but it is the major cause of a lower standard of living, societal inequalities and disorder, below average business performance, and other unpleasant events brought by deleterious actions (Levine & Reinarman, 2004). In addition, becoming a wet country would reduce the price level of alcoholic drinks; hence, the level of consumption and the degree of distribution would also be increased. However, the increase of quantity demanded would also increase social crimes, DUI-related incidents, and other alcohol-related problems. In fact, “for every dollar the government collects in alcohol taxes, it expends about $9 (for such things as Medicare and Medicaid treatment for alcohol-related health troubles, long-term rehabilitation treatment, unemployment costs, and welfare)” (Stutman, n.d.). 6. Conclusion Traditionally, the United States is imposing a total prohibition with regard to the importation, production, and distribution of alcoholic beverages. However, the market trend is slowly changing in a one-way process, which is in favor to the elimination of the prohibition. It is highly visible that local authorities are now giving more importance on the short-term interest of becoming a wet county including higher tourism activities, lower unemployment rate, and a tax revenue. However, anti-alcohol groups have argued that these advantages would not last long because the increased demand and usage of alcohol would only trigger crimes, DUI-related incidents, and other alcohol-related health problems. Moreover, it is cited that benefits carried by becoming a wet county are outweighed by the cost of legalization. Hence, Americans today are still undecided on what to choose between the “yes or no” of the wet/dry referendum. References Black, R. (Ed.). (2010). Alcohol in popular culture: An encyclopedia. USA: Greenwood Publishing Group. Buglass, A. J. (2011). Handbook of alcoholic beverages: Technical, analytical and nutritional aspects. New Jersey, NJ: John Wiley & Sons. Dull, R. T., & Giacopassi, D. J. (1988). Dry, damp, and wet: Correlates and presumed consequences of local alcohol ordinances. The American Journal of Drug and American Abuse, 14 (4), 499-514. Hampson, R. (2010, June 30). Dry America’s not-so-sober reality: It’s shrinking fast. USA Today. Retrieved from http://www.usatoday.com/news/nation/ 2010-06-30-dry-counties_N.htm Harrison, D. (2007). Towards developing a framework for analysing tourism phenomena: A discussion. Current Issues in Tourism, 10 (1), 61-86. Higgins-Desbiolles, F. (2006). More than an industry: The forgotten power of tourism as a social force. Tourism Management, 27 (6), 1192-1208. Knight, F. W., & Martinez-Vergne, T. (Eds.). (2005). Contemporary Caribbean cultures and societies in a global context. USA: University of North Carolina Press. Levine, H. G., & Reinarman, C. (2004). Alcohol prohibition and drug prohibition. CEDRO. Retrieved from http://www.cedro-uva.org/lib/levine.alcohol.html Milne, R. S., & Backhausen, M. (2003). Opportunities in travel careers. USA: McGraw -Hill. Newman, R. (2012, June 13). Where taxes are already going up. US News. Retrieved from http://www.usnews.com/news/blogs/rick-newman/ 2012/06/13/where-taxes-are-already-going-up Norwood, J. (2012). Wet or dry. Marshall County Tribune-Courier. Retrieved from http://www.tribunecourier.com/pages/full_story/push?article-Wet+or+Dry%20&id=17676989&instance=main_top_story Organisation for Economic Co-Operation and Development. (2010). OECD tourism trends and policies 2010. France: OECD Publication. Severson, K. (2011, September 28). States putting hopes in ‘bottoms up’ to help the bottom line. The New York Times. Retrieved from http://www.nytimes.com/ 2011/09/29/us/alcohol-laws-eased-to-raise-tax-money.html?pagewanted=1 Stutman, B. (n.d.). Legalize marijuana for tax revenue. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/debateroom/archives/ 2010/03/legalize_mariju.html United States Tax Revenue: T10-Alcoholic Beverages - Q3 2011. (n.d.). Retrieved from http://www.indexmundi.com/facts/united-states/state-taxes/ all-states/alcoholic-beverages/tax-revenue/2011/q3#table US Tourism Industry. (2010). Economy Watch. Retrieved from http://www.economywatch.com/world-industries/tourism/industry.html Wheeler, B. (2012, March 21). The slow death of prohibition. BBC News. Retrieved from http://www.bbc.co.uk/news/magazine-17291978 Read More