Liquor Control after Repeal

A document from the CQ Researcher archives:

Report Outline
Probable Repeal of Eighteenth Amendment on December 5
Wet and Dry Status of the States After Repeal
New State Laws for Control of Liquor Traffic
Question of Federal and State Liquor. Taxes
Special Focus

Probable Repeal of Eighteenth Amendment on December 5

Repeal of the Eighteenth Amendment will take place, it may now be predicted with virtual certainty, on December 5, nine months and one-half following submission to the states of the Twenty-first, or repeal, amendment on February 20, 1933.1 Virginia became on October 3 the 32nd state to vote in unbroken succession for repeal of federal prohibition. Florida is expected to take similar action on October 10. On November 7 the voters of six more states—Kentucky, North Carolina, Ohio, Pennsylvania, South Carolina, and Utah—will go to the polls to record their verdict on the question, making 39 states in all that will have acted by that date.2 Ratification conventions will be held in four states—-Ohio, Pennsylvania, South Carolina, and Utah—on December 5. Since this formal action will have been taken before that date in all but three of the necessary number of states, one of these four will in all probability be the 36th state to ratify, thus completing the process of taking prohibition out of the Constitution.3

The repeal amendment becomes effective immediately upon ratification. Since the authority under which Congress legislated against the manufacture, transportation, and sale of liquor in the states will thereby be withdrawn, the regulatory sections of the Volstead act will automatically expire so far as they apply in the states, though they may remain in force, pending further congressional action, in the District of Columbia, the Panama Canal Zone, and the Virgin Islands. In Alaska and Hawaii local prohibition acts will probably still be effective, while prohibition may be, continued by the naval authorities in Guam and Samoa. Puerto Rico's prohibition law has been repealed, and that territory will be wet. The Philippine Islands have never been subject to American prohibition laws.

While there is a possibility that Congress will be summoned to Washington in advance of the regular January session, in order to revise taxes and tariffs on wines and liquors, the President has not yet indicated any intention of calling a special session. Certain emergency taxes imposed by the National Recovery Act will, under the terms of that law, be removed on January 1 by reason of previous repeal of the Eighteenth Amendment, liquor taxes being counted upon to yield an equivalent or greater revenue. Since the revised imposts on liquor sales and imports will presumably be higher than those fixed by existing laws, the federal government will lose potential revenue until Congress has an opportunity to act upon new rates. The interim period between the prospective date of repeal and the time when a new law can be enacted in the normal course of events is so short, however, that the administration may be guided largely by political considerations in deciding whether or not to call a special session.

State Preparations for Control of the Liquor Traffic

According to a compilation made by the Association Against the Prohibition Amendment, liquor sales will be legal in at least 19 states as soon as the Eighteenth Amendment is repealed. In nine of those states laws setting up permanent liquor control systems have already been approved and will go into full effect upon federal repeal. In New York the State Alcoholic Beverage Control Board, which now administers that state's beer control law, has been empowered to regulate the hard liquor traffic until April 1, 1934, by which time it is anticipated that legislation governing the question will have been enacted. The legal situation in Indiana is not clear. Under existing law drug stores would apparently be the only authorized dispensers of spirits, but there is expected to be an early legislative session to establish a broad liquor control system. Similar action will probably be taken before December in the other eight states, with the possible exception of Louisiana.

Plans for regulation of the liquor traffic are being considered in seven additional states, indicating that their state prohibition laws will be repealed either before or soon after repeal of the Eighteenth Amendment. Whereas only 15 states were wet in 1919, it now appears that at least 26 states will soon enter that category. The number will probably be increased a year hence, for several states having prohibition provisions in their state constitutions have arranged to vote on their repeal in November, 1934. In the meantime, other states having only statutory prohibition may join the wet ranks.

Since all but one of the states now without state prohibition or enforcement acts have either adopted control systems or made fairly definite preparations to do so prior to federal repeal, predictions of a period of chaos, in which many states would be flooded by an unregulated, unlicensed, and untaxed liquor traffic, scarcely seem justified. The need of most states for the revenue to be derived from liquor licenses and taxes has in itself been a strong influence toward advance action. The stringent character of most of the new control laws, moreover, indicates that state authorities are alive to the dangers of lack of adequate regulation and intent upon guarding against the abuses attending the liquor traffic in pre-prohibition years.

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Wet and Dry Status of the States After Repeal

The Movement for state prohibition, which had made temporary gains in the eighteen-fifties and again in the eighteen-eighties,4 gathered such headway after 1907 that by the time the Eighteenth Amendment went into effect, 33 states had already become dry. Nineteen of that number had written prohibition into their state constitutions, while 14 others prohibited the liquor traffic by statutory enactment. With the exception of Maryland, the 15 states still wet when national prohibition was adopted all subsequently enacted enforcement laws. By the end of 1930 five states had carried their opposition to prohibition to the point of repealing statutes under which they cooperated with the federal authorities in the task of enforcement. Thereafter the revolt against the dry regime grew rapidly. In November, 1932, referenda on one phase or another of the question were held in 11 states, and the wets rolled up large majorities in every one of them, sweeping away numerous state dry laws.5 Since that time several additional states have either repealed their prohibition statutes or provided for their repeal upon voiding of the Eighteenth Amendment.

States Where Legalization of Liquor Sales Is Imminent

As the situation now stands, liquor sales will be legal, at the end of federal prohibition, in four more states than was the case at its beginning. The following table lists the 15 states that were wet just prior to the national dry era and the 19 states that will be wet upon its termination.

Four states appear in the first but not the second group—Massachusetts, Minnesota, Missouri, and Vermont. In all of them except Vermont, however, steps have been taken looking toward early legalization of the liquor traffic.

Massachusetts repealed its “Baby Volstead” act in 1930, but another provision of state law prohibits sale of beverages, except beer, with an alcoholic content of over 2.75 per cent. Governor Ely of Massachusetts was the first governor to appoint a commission, in November, 1932, to study plans for liquor control. Hearings have now begun on an act drafted by a special recess legislative committee. Control plans are also being considered in Minnesota and Missouri, and the legislature of the former state is to meet this fall to pass a control law. It had been supposed that the Missouri enforcement act, applying to beverages defined as intoxicating by federal laws, would automatically expire with the passing of federal prohibition, but a recent ruling held that action by the legislature would be necessary to void the statute.

Three other states having only statutory prohibition are preparing to repeal their state laws. An Iowa commission is now drafting a control plan for action by the legislature at a session this fall. A plan will probably be presented to a special session of the Michigan legislature in December. At the Virginia election of October 3 the electors, in addition to voting for repeal of the Eighteenth Amendment, authorized formulation of a liquor control plan by a commission already appointed by Governor Pollard, for submission to the legislature in January. In Ohio, a state which has both constitutional and statutory prohibition, the electors are to vote November 7, 1933, on repeal of the constitutional clause. A senate committee is considering a proposed control law, and it is thought that the legislature will be called in special session to substitute a regulatory system for the present dry statute.

Outlook for End of the Dry Regime in Other States

There are now 16 states which have dry statutes of some kind but which have not embodied prohibition in their state constitutions. In these states, after repeal of the Eighteenth Amendment, the liquor traffic can be legalized by legislative enactment without consulation of the voters through referenda. Besides Iowa, Massachusetts, Michigan, Minnesota, Missouri, and Virginia, which are already preparing to repeal their dry statutes, these states are: Alabama, Arkansas, Georgia, Mississippi, New Hampshire, North Carolina, North Dakota, South Carolina, Tennessee, and Vermont. No plans have been made known for special legislative sessions to act on the liquor question in any of the ten states in this group. The legislatures of Mississippi and South Carolina will convene in January, 1934, but there will be regular sessions in none of the other eight states until January, 1935. Most of them are in what used to be considered traditionally dry territory. A majority may continue as prohibition states. Accomplishment of federal repeal, however, may strengthen the demand for legalization of the liquor traffic.

Clauses prohibiting the liquor traffic still remain in the constitutions of the following 13 states: Florida, Idaho, Kansas, Kentucky, Maine, Nebraska, Ohio, Oklahoma, South Dakota, Texas, Utah, West Virginia, and Wyoming. Ohio voters, as previously noted, will go to the polls next month to act on a proposal to take prohibition out of the state constitution. A similar proposition will be submitted to Utah voters on November 7 of this year, but no plans have yet been made to repeal statutory prohibition in that state before the regular session of the legislature in January, 1935. On November 6, 1934, repeal of state constitutional prohibition will be put up to the voters of six other states—Florida, Idaho, Nebraska, South Dakota, West Virginia, and Wyoming. Florida and Wyoming have already repealed their enforcement acts. While a commission has been named to consider a control law for the latter state, a regulatory plan cannot legally be put into effect as long as prohibition remains in the state constitution. Florida and Wyoming are therefore two states in which an uncontrolled and illegal liquor traffic may nourish for a considerable period following repeal of federal prohibition.

It is reported that the regular session of the Kentucky legislature in January, 1934, may provide for a vote on repeal of the prohibition clause in the constitution of that state. A special session in Kansas this month may take similar action. Maine, Oklahoma, and Texas appear to be the only states in the group having constitutional prohibition that are not yet considering legalization of the liquor traffic. Since Kansas has been for years one of the strongest dry states, its voters, if an election on the question is held, may choose to retain prohibition.

Assuming that they will do so, and counting as dry those states that have not yet made any preparations for repeal of state constitutional or statutory prohibition, the future dry roster is found to include 14 states: Alabama, Arkansas, Georgia, Kansas, Maine, Mississippi, New Hampshire, North Carolina,6 North Dakota, Oklahoma, South Carolina, Tennessee, Texas, and Vermont. While this lineup leaves out of account the possibility that some of the states that have arranged to vote on repeal of their dry laws may not go wet, the present trend of sentiment indicates that any additions to the dry roster from that source will be more than balanced by eventual withdrawal of certain states now included in the group. Any such compilation at this time necessarily constitutes only a rough approximation of what may actually take place. On the basis of present evidence, however, there is nothing to show that, once the initial adjustment to the new regime has been made, there will be even half as many dry states as there were in 1919.

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New State Laws for Control of Liquor Traffic

Adoption of the Eighteenth Amendment and the Volstead act imposed upon the United States the utmost possible measure of uniformity in handling of the liquor problem. Although enforcement differed in different states and cities in accordance with the cooperation extended by state legislatures and state and municipal police authorities, the whole country was theoretically bone-dry. The impossibility of recognizing and providing for differences in public sentiment toward the use of alcoholic beverages may be considered primarily responsible for failure of national prohibition. Repeal makes possible the assertion of such differences and enables the several states to seek solution of their particular problems in their own way. That they are doing so is shown by the wide variations in the ten control laws so far adopted.

The new laws run all the way from Montana's provision for extremely rigorous regulation under a state monopoly system to Nevada's mere delegation of regulatory authority, practically without restriction, to city governments and county commissioners. Some of the plans make use of certain features of foreign liquor control systems not previously tried in this country. Others contain provisions commonly used in the United States before prohibition, accompanied by new control devices designed to prevent former abuses. With the exception of the Nevada law, the new statutes in general are comprehensive documents setting forth, often in great detail, numerous regulations and requirements aimed to bring about complete control of the liquor traffic and full protection of public interests. On the whole, conditions governing sale of liquor under these laws will be much more stringent than those prevailing in wet states before 1920.

General Banning of Saloons Under New Control Acts

Prior to adoption of national prohibition, saloons were permitted in every state that allowed sale of liquor, except in South Carolina during operation of the state dispensary system from 1892 to 1907.7 Although their number was sometimes restricted according to a fixed ratio to population or by means of high license fees, the saloon was outlawed only in territory made dry by state enactment or by local or county option. The most striking feature of the 1933 control legislation is that not one of the new laws, except that of Nevada, permits the operation of a saloon. Retail sale of distilled liquors for consumption on the premises is in general either forbidden entirely or restricted to sale for consumption with meals in hotels and restaurants. So far as the states which have already acted are concerned, the strictures uttered against the saloon during the last decade are bearing fruit in the plans for handling a revived liquor traffic.

California and Colorado have incorporated a ban on the saloon in constitutional amendments providing for legalization of the liquor traffic. The referendum by which Washington's prohibition laws were repealed last November included a specific provision that such repeal “shall not have the effect of reviving or making effective any law providing for the licensing and operation of saloons.” The referendum proposals for repeal of constitutional prohibition to be voted on in West Virginia and Wyoming next year also contain “no saloon” clauses.

In both California and Colorado distilled liquors may be sold only in original packages and may not be consumed on the premises. Hotels and restaurants will be restricted to selling wines and beer, and only with meals, this restriction on beer applying in Colorado only to beer of over 3.2 per cent alcoholic content. The stringency of these provisions, apparently not realized at the time the constitutional amendment was promoted in California, is reported to have produced a reaction there, particularly among hotel proprietors. The governor has been requested to call a special session of the legislature to initiate a modifying amendment that will permit sale of distilled liquors in hotels and possibly allow revival of hotel barrooms. It would require two years to complete the process of adopting such an amendment.

The Connecticut control law permits sale of beer and wines, but not distilled liquors, by hotels, restaurants and clubs for consumption on the premises. The law specifically forbids consumption of spirits in any public room of a hotel or restaurant. The Arizona statute, on the other hand, allows sale of distilled liquors by hotels and restaurants for consumption with meals, and by hotels to their guests for consumption in their rooms. In Rhode Island, hotels and restaurants may sell wines and beer for consumption with food at tables, and hotels (but not restaurants) may serve distilled liquors on the same conditions. New Mexico hotels and restaurants may obtain special licenses to serve distilled liquors, as well as wines and beer, to their patrons, but only with meals. Except as so provided, the New Mexico law forbids consumption of any alcoholic beverage, even beer, in the public rooms of hotels or restaurants, in public dance halls, in pool rooms, on the street, in government buildings, or in any other public place. The Montana statute prohibits consumption of any alcoholic beverage except beer in any public place.

In Delaware, hotels, restaurants, and clubs are authorized to sell spirits, wine, and beer by the glass or bottle for consumption in any dining room or tap room or in a hotel bedroom. While it is not required that food be served with liquor, consumption while standing or sitting at a bar or counter is forbidden except in clubs, and it is made the duty of persons in charge of places where liquor is sold to discourage the practice of treating. There has been no indication that the forthcoming New York regulations for control of hard liquors will permit operation of saloons.

Proposals for a Federal Prohibition of the Saloon

Suggestions have come from dry sources that Congress lay a national ban on the saloon by forbidding issuance of internal revenue tax receipts or permits for premises selling liquors by the drink over a bar or counter. Acceptance of such a suggestion can hardly be anticipated, however, in view of the fact that the Senate, before approving the proposed Twenty-first Amendment, eliminated a section inserted by the Judiciary Committee giving Congress concurrent power “to regulate or prohibit the sale of intoxicating liquors to be drunk on the premises where sold.” Other amendments aimed at federal prohibition of the saloon were likewise consistently voted down.8 The fear was expressed that any such provision, in addition to restricting the liberty of the states, would involve the federal government in enforcement problems comparable to those experienced under the Eighteenth Amendment.

Congress did retain in the new amendment a section prohibiting “the transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof.” This section embodied the essential provisions of the Webb-Kenyon act of 1913, which forbade shipment in interstate commerce of liquor consigned to states where it was to be illegally used or sold. It did not go as far as the so-called Reed amendment to the Post Office appropriation bill of 1917, which made it illegal to transport liquor into any state that forbade the sale of liquor, whether or not it also forbade its importation by individuals for their own use.9 It has been presumed that the Webb-Kenyon act and the Reed amendment, which have never been repealed, would again become operative on repeal of the Eighteenth Amendment. Experts of the Department of Justice, who are studying this and other legal aspects of repeal, have indicated their agreement with this view.

Provisions Against Abuses by Liquor and Political Interests

Direct or indirect control of saloons by brewing or distilling interests was one of the recognized evils of the liquor traffic before prohibition. Many saloons were owned outright by breweries, and individual saloonkeepers were frequently assisted by such interests in establishing and maintaining their places of business. Temperance workers charged that brewing companies actively promoted “blind pig” enterprises in prohibition territory and maintained funds to pay fines assessed against their operators. Liquor interests exercised wide political influence, and there were endless instances of scandal and corruption on this score.

Recollection of these evils is reflected in the new liquor laws. All of the control plans so far adopted, except that of Nevada, contain provisions designed to keep beverage manufacturers out of the business of retailing their products and to prevent the development of interlocking relationships between political and liquor interests. Thus manufacturers are either directly or indirectly forbidden to operate or have any financial interest in establishments selling liquor at retail, and the members of boards created to administer the control systems are in most cases forbidden to have any interest whatever in the liquor business. The California law is particularly explicit on these matters, the statute reading as follows:

Sec. 26. No person who owns any interest in any business or occupation in respect to which a winery, brewery, or distillery license is issued, or who is an officer, employee, or agent thereof, and no importer or any officer, director, or employee of such importer or any person who owns any interest in the business of such importer shall acquire, hold, or have any interest either directly or indirectly in the business of any “on sale” licensee nor in the furniture and fixtures on the premises wherein the business of such licensee is conducted; nor shall any such person endorse, guarantee, or stand surety for a lease or any other obligation of such licensee.

Sec. 27. No member of the board shall be employed in any way by any person licensed under this act; nor shall any member hold stock or other securities in any corporatoin licensed under this act; nor shall any member be connected or affiliated in any way with any person licensed under this act.

The Connecticut law provides that no person holding a liquor permit of one class shall be granted a permit of any other class, forbids loans by liquor manufacturers or members of their families, or stockholders of corporations manufacturing liquor, to holders of wholesale or retail liquor permits, and, in addition, prohibits the granting of any permit to a sheriff, deputy sheriff, constable, grand juror, justice of the peace, prosecuting officer, or selectman, except a selectman who may be a hotelkeeper.

The provisions governing appointment of control boards evidence in general an intention to give these bodies a high standing and free them from political influences. The Connecticut Liquor Control Commission, for example, consists of three members appointed by the governor for overlapping six-year terms, not more than two members to be of the same political party. The New York State Alcoholic Beverage Control Board is composed of five members appointed on a bi-partisan basis by the governor, with the consent of the senate, for five-year terms. A like commission is provided for in Rhode Island, except that the governor is to make nominations from lists submitted by the chairmen of the political parties. In Arizona the law is to be administered by the State Tax Commission, in California by the State Board of Equalization, in Montana by the State Board of Examiners, and in New Mexico by a State Board of Liquor Control composed of the secretary of state, attorney general, and director of public health. In Colorado administration is entrusted to the state treasurer, while the Delaware Liquor Commission consists of one man appointed by the governor for a five-year term.

Jouett Shouse, president of the Association Against the Prohibition Amendment, asserted in an address at Alexandria, Virginia, September 28, 1933, that “the most important phase of the whole business is that the right-kind of men and women shall have the authority and be charged with the duty and responsibility of administering the law. If a high-class control board is created in each state, composed of outstanding citizens and vested with the final authority of revocation of licenses without court action, no matter what the plan of retail distribution, more can be done to prevent abuse than through the writing of any laws that the wit of man can devise.” The new California law gives the control board final authority to revoke licenses, but the laws of the other states provide specifically, or imply, a right of appeal to the courts.

Montana's Plan for State Monopoly of the Liquor Traffic

The Montana liquor law, approved March 14, 1933, set up a plan of control in some respects more drastic than outright prohibition. The statute regulates consumption, as well as sale, of liquor, contains a long list of “Prohibitions,” and includes severe enforcement clauses. Provision for a system of state liquor stores and the requirement of individual permits for the purchase of liquor are the central features of the plan. The state thus seeks to exercise absolute control over the business of liquor distribution and only slightly less complete control over the consumers of liquor. The State Board of Examiners is denominated as the “Montana Liquor Control Board” and armed with extensive powers to administer the liquor monopoly and carry out the other provisions of the act.

State liquor stores are to be maintained at county seats and such other municipalities as the board may determine, except in counties where the electors, at an election called on petition of one-third of their number, vote against the sale of intoxicating beverages. Liquor for beverage purposes may be obtained only at a state store on presentation of the proper permit. Possession of any liquor not so obtained is made a punishable offense. The liquor stores are to fill physicians' prescriptions except in municipalities where there is no store, druggists then being permitted to do such business. Liquor for beverage use may be sold only in original packages, to which must be affixed the official state label. State stores may furnish beer to clubs holding licenses to sell that beverage to their members.

Control Over Liquor Consumers Under Montana Law

Individual permits, valid until December 31 of the year issued, will be granted to persons 21 years of age or over who have resided in the state for at least a month. Permits good for one month will be granted to persons temporarily sojourning in the state. A fee of $2 will entitle the holder of a one-year permit to purchase spirits, wine, or beer. If only beer is desired, the fee will be $1, while a fee of 50 cents will authorize a single purchase of any alcoholic beverage. On the temporary permits a fee of 50 cents will entitle to one purchase, but $1 must be paid for the right to make more than a single purchase. The board is empowered to prescribe the quantity of liquor which may be bought at any one time or within any specified period. Written orders must be made for each purchase, other than beer, and the state liquor vendor is required to enter on the individual's permit the kind and quantity of liquor sold and the date of sale. Payment must be made in cash. Special permits are prescribed for druggists, physicians, dentists, veterinaries, and persons using alcohol for industrial or scientific purposes.

Liquor obtained by an individual may be kept and consumed only in his residence or hotel room. In the list of “Prohibitions” it is provided that no person shall permit drunkenness to take place in any house or premises of which he is owner, tenant, or occupant; permit any person apparently under the influence of liquor to consume any liquor on such premises; or give liquor to any person apparently intoxicated. Violation of any provision of the act subjects the holder of a permit to its suspension or cancellation. When a permit is cancelled, all liquor vendors are to be notified by the board. No new permit may be issued for one year, unless the board so directs. A court may issue an order of interdiction against any person who “by excessive drinking of liquor, misspends, wastes, or lessens his estate, or injures his health, or endangers or interrupts the peace and happiness of his family.” In such cases the individual's permit will be cancelled and sale of liquor to him forbidden until further order.

Persons who violate any provision of the act are to be deemed guilty of a misdemeanor, punishable by a fine of not over $500 or imprisonment for not over six months, or both. The statute aims in numerous ways to facilitate prosecution of offenders in the courts. It is provided, for example, that “conviction may be based upon circumstantial evidence reasonably tending to establish the guilt of the accused beyond a reasonable doubt.” Another section states that “the burden of proving the right to have or keep or sell or give or purchase or consume liquor shall be on the person accused of improperly or unlawfully having or keeping or selling or giving or purchasing or consuming such liquor.” Similarly, in cases involving prescriptions of liquor for medicinal purposes, “the court trying a case shall have the right to draw inferences of fact from the frequency with which similar prescriptions are given and from the amount of liquor prescribed or administered, and from the circumstances under which it is prescribed or administered.”

One-half of the profits of the liquor monopoly remaining after creation of a reserve fund and payment of administrative expenses is to be paid into the general fund of the state. The other half is to be apportioned among the counties and cities in proportion to the amount of fees, charges, and penalties collected from them under the provisions of the act. The law levies no direct taxes on liquor sold within the state, but the control board will fix the prices to be charged at the state stores, opportunity thus being given for indirect imposition of a state tax on the liquor traffic.

A state liquor monopoly less comprehensive than that of Montana is provided for in Deleware. All deliveries of liquor for resale are to be made by or through the liquor commission and the commission may establish its own retail liquor stores, but sales may also be made by privately-owned stores. Personal licenses to buy liquor will be required by individuals only when they wish to acquire stock for personal use in excess of the amounts which may otherwise be bought at one time, the latter limitations being fixed at one bottle of spirits and 12 bottles of wine or beer. New Mexico has provided for a personal license system similar to that of Montana. In Colorado liquor is to be sold at retail only in establishments engaged in no other business, but these retail liquor stores will be privately owned.

Liquor Control System Adopted by State of Connecticut

Connecticut is one of the two states which never ratified the Eighteenth Amendment. Although it passed a state enforcement code in 1921 and retained it on the statute books, the predominant sentiment in the state has been strongly anti-prohibitionist. The plan of control adopted there is probably more nearly typical of the systems that will be established in other states than the drastic Montana state-sale experiment. The new act was approved April 20, 1933, and is already in effect as regards sale of beer.

The Connecticut law vests control of the alcoholic beverage traffic in a liquor control commission, provides for local option, and establishes ten classes of permits, as follows: (a) manufacturers, (b) wholesalers, (c) package stores, (d) hotels, (e) restaurants, (f) clubs, (g) taverns, (h) railroads, (i) boats, and (j) druggists. The fee for a manufacturer's permit is fixed at $1,000 a year, for a wholesaler's permit at $500 a year, and for all other permits at $50 a year. Each permittee is required to file with the commission a bond for $1,000, to be forfeited on conviction of violation of any provision of the act. Persons who have served a sentence for violation of any federal or state law concerning the manufacture or sale of alcoholic liquor, before or after passage of the control act, or who have been fined more than once for any such violation, are forbidden permits. No alien may be granted a permit unless be has received his first naturalization papers and satisfied the commission of his intention to take out final papers. Any permittee convicted of violating the act, in addition to other penalties, will lose his permit and the right ever again to be granted a permit, and no permit may be granted any other person for the same premises until a year has elapsed.

In the case of manufacturers' permits, the place of manufacture must receive the prior approval of the commission. A package store permit allows wholesale or retail sale of liquor, not to be drunk on the premises, in sealed containers of not less than one quart capacity. A druggist's permit, in addition to authorizing filling of physicians' prescriptions, allows sale of all alcoholic liquors in containers of not more than one quart capacity, the liquor not to be drunk on the premises. A druggist's permit requires a certificate of fitness from the pharmacy commission. Control over the number of drug stores in the state is given by the provision that “no druggist permit shall be issued covering a new drug store or a new location for an old drug store until both the pharmacy commission and the liquor control commission shall have been satisfied that a drug store at such location is necessary to the convenience and best interests of the public.” Druggists in towns dry by local option may fill prescriptions for alcoholic liquor. No liquor permit, except a druggist's permit, is to be granted “in those parts of a permit town where it is apparent that the party applying for it is seeking to obtain patronage from an adjoining non-permit town.” Railroad and manufacturers' permits are not affected by local option.

Provisions of Hotel, Restaurant, and Club Permits

Hotel and restaurant permits authorize sale of wine and beer for consumption on the premises, with or without meals. Railroad and boat permits authorize consumption of such beverages with meals. Club permits allow sale of wine and beer to be consumed on the premises by members or their guests. Club permits may be obtained by fraternal, benevolent, or patriotic societies which have been in existence for at least three years. No permit is required for sale of beer and wine in municipal golf club restaurants or lunch rooms for consumption on the premises, with or without food. A tavern permit authorizes sale of beer for consumption on the premises, with or without food. Tavern proprietors are not to allow consumption of any other alcoholic liquor on their premises, and taverns must not be screened from the street. Filling station beer parlors are discouraged through a provision forbidding tavern permittees to sell or have any interest in the sale of motor fuel or automobile accessories on the tavern premises or within 500 feet therefrom.

The commission, before granting a permit, is to be satisfied that a hotel or restaurant has “adequate and sanitary kitchen and dining room equipment and capacity” and “such number and kinds of servants and employees as the commission may by regulation prescribe for preparing, cooking, and serving suitable food for its guests.” A similar provision applies to clubs, except fraternal, benevolent, or patriotic societies, and clubs must file with the commission annually a list of the names and residences of their members. To obtain a club permit, a club must have sufficient income, exclusive of proceeds from the sale of alcoholic liquors, to meet its annual rental charges or its annual charges for taxes, insurance, repairs, and mortgage interest.

Regulation of Hours and Days of Sale in Connecticut

Sale of liquor in hotels, restaurants, taverns, and clubs is to be permitted on week-days only between the hours of 9:00 A. M. and midnight and on Sundays between 1:00 and 9:00 P. M. Package stores may sell only on week-days between 7:00 A. M. and 6:00 P. M. The commission may shorten such hours by regulations uniformly applicable throughout the state, but any municipality may fix the times of sale by local ordinance superseding the regulations of the commission. Sales by hotels, restaurants, taverns, clubs, and package stores are forbidden on election days.

No permittee may sell or deliver liquor to any minor under 18, any intoxicated person, or any habitual drunkard. It is also provided that the selectmen of every town shall annually supply all permittees within their respective towns with a list of persons known to use alcoholic liquors to whom town aid has been given within the previous six months. No liquor may be sold, given, or delivered to such persons or members of their legal families except on a physician's prescription endorsed by a selectman. Selectmen are similarly to ban sale of liquor to any person addicted to its excessive use, on complaint of a member of such person's immediate family, when satisfied that such complaint is true. No liquor vendor or his agent may deliver liquor within the limits of a town dry by local option, but there is nothing in the law to prevent a resident of such town from himself transporting liquor into the town for his own use.

A first violation of any provision of the act is punishable by a fine of from $10 to $200. A prison term of from ten days to six months may be added for a second offense, but if the second or subsequent conviction is for violation of a provision of the act which the offender has previously been convicted of violating, the minimum fine is to be $25. Any person or his agent who sells liquor to an intoxicated person is made liable for damages on account of any injury which such person may cause the person or property of another in consequence of such intoxication.

While some of the new control laws levy excise taxes on the quantity of liquor sold within the state, the Connecticut statute imposes a privilege tax of 4 per cent on the gross receipts from the retail beverage business and of 1 per cent on the gross receipts from the wholesale business, the taxes on such business to be in lieu of the state's net income tax. The revenues from these taxes will go into the general state fund. The revenue from permit fees, on the other hand, will be distributed to the towns where the permittees operate their business, except that counties are to receive the revenue from permits granted to manufacturers and wholesalers within their limits.

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Question of Federal and State Liquor. Taxes

Present Federal Levies on Liquor Sales and Imports

Dependable Estimates of the revenue that may be derived by the federal government from the liquor traffic cannot be made until it is known what tax and tariff rates Congress will impose and how many states will legalize the sale of alcoholic beverages. Even estimates based on pre-prohibition consumption, with allowances for increases in population, may be upset by changes that have taken place in drinking habits during the last 15 years. Director of the Budget Douglas stated before a congressional committee last May that liquor taxes would return $250,000,000 to the federal treasury, in addition to the yield of the present beer tax. On September 14 Senator Harrison (D., Miss.), chairman of the Senate Finance Committee, asserted that taxes on spirits and wines would yield $500,000,000 next year and that there would be an additional $200,000,000 from beer. A committee of Treasury officers is now engaged in compiling and classifying tax and tariff schedules that will become operative on repeal of the Eighteenth Amendment. The House Ways and Means Committee will probably meet early in December to frame a revenue bill for introduction as soon as Congress convenes.

Some of the more extravagant estimates of prospective federal liquor revenue have arisen from a misunderstanding as to the tax that will be collected on distilled spirits. The prewar rate of $1.10 a gallon was doubled by the Revenue Act of 1918, and after the war a tax of $6.40 a gallon was imposed on spirits “diverted” for beverage purposes. The $2.20 rate continued to apply on spirits legally sold, until it was reduced to $1.10 by the Revenue Act of 1926. The latter is the tax which it has been determined will be effective after repeal, the Treasury holding that the $6.40 rate was a penalty levy applying only on spirits illegally diverted. Federal taxes on other alcoholic beverages under existing laws will be as follows:

Beer, ale, and porter: Not over 3.2 per cent, $5 a barrel (16.1 cents a gallon); over 3.2 per cent, $6 a barrel.

Apple cider and other fruit juices, except wine: Not over 3.2 per cent $5 a barrel; over 3.2 per cent, no tax.

Still wines: Not over 3.2 per cent, $5 a barrel (16.1 cents a gallon); 3.2 to 14 per cent, 4 cents a gallon; 14 to 21 per cent, 10 cents a gallon; 21 to 24 per cent, 25 cents a gallon; over 24 per cent, $1.10 a gallon.

Sparkling wines, champagne: 12 cents a half pint.

Cordials and liqueurs: 6 cents a half pint.

Imports of alcoholic beverages are at present subject to the following tariff duties: Distilled spirits, cordials, and liqueurs, $5 a gallon; beer, ale, and porter, $1 a gallon; still wines and vermouth, $1.25 a gallon plus one-third of the duty on empty bottles; sparkling wines and champagne, $6 a gallon.

Revision of Federal Taxes on Liquors and Wines

The existing tax schedules contain obvious inconsistencies. The federal statute of March 22, 1933, legalizing alcoholic beverages of 3.2 per cent imposed the same tax on wines of that strength as on beer—$5 a barrel or approximately 16.1 cents a gallon. The old tax on wines, increasing on a graduated scale according to alcoholic content, was only 4 cents a gallon on wines under 14 per cent. This means that after repeal any 3.2 per cent wine still sold will pay a heavier tax than any but wines of highest alcoholic content. Similarly, while there is a tax of $5 a barrel on 3.2 per cent fruit juices, there will be no tax on such beverages of higher alcoholic content. The old rate of $6 a barerl on beer was reduced to $5 in the case of 3.2 per cent brews in order to lessen competition with bootleggers. When stronger beer becomes legal, the same consideration should counsel reduction of the $6 rate.

The main reason for revising liquor taxes, however, is to obtain larger revenues than the present rates would produce. One of the chief economic arguments for repeal of the Eighteenth Amendment was the contention that revenue from the liquor traffic, all the profits of which went to bootleggers and racketeers under prohibition, should be made available to the various governmental units. Substantial assistance in solving difficult current budgetary problems has been generally anticipated from this source. Such expectations on the part of the federal government cannot be fully realized unless higher taxes are imposed. While the tax on beer may not be raised, the levies on spirits and wines are likely to be greatly increased.

In an article that appeared in the Scripps-Howard newspapers on September 20, 1933, Jouett Shouse said:

The federal government is entitled to a very considerable revenue. The thing to guard against is taxation so high as to encourage a continuance of bootlegging. It seems to me that a tax of $5 per gallon by the federal government will not be too much, but if Congress should apply a tax of that amount, it becomes seriously questionable whether the states should also attempt to place a tax upon the manufactured product. Undoubtedly the states and municipalities have the right, which they should and will exercise, to secure revenue in a proper way through licenses.

Although the new laws of Arizona, California, and Nevada levy no direct or indirect tax, other than license fees, on the liquor traffic, such is not the case in the other wet states that have taken action on the matter. Connecticut's tax on the gross income of liquor wholesalers and retailers, while it replaces a net income tax that otherwise would be levied, will probably be more severe than that tax. Montana will obtain revenue from alcoholic beverages through the profits of its state liquor stores. New Mexico imposes an excess profits tax on liquor dispensers. Other states have levied excise taxes, as follows:

Colorado: Spirits, 10 cents a pint; wines, 3 cents a pint; beer (over 3.2 per cent), 3 cents a gallon.

Delaware: Spirits, $1 a gallon; wines, 40 cents a gallon; beer, $1 a barrel.

New York: Spirits, $1 a gallon; still wines, 10 cents a gallon; sparkling wines, 40 cents a gallon; beer, $1 a barrel.

Rhode Island: Tax of $1 on every 31 gallons of any beverage manufactured for sale in the state (exports to other states exempt).

The Rhode Island law also provides that liquor wholesalers' profits in excess of 9 per cent on actual capital invested, after allowances for repairs and depreciation, shall be paid to the state.

If taxes of as much as $1 a gallon on spirits were to be levied by many states, the federal government might find it inadvisable to impose as high a tax as $5 a gallon on such beverages. Although consumers have become accustomed to paying high prices for good liquor under prohibition, bootleggers might still be able to compete with legitimate sellers if legal liquor were burdened with such heavy taxes. On the other hand, bootlegging may become more hazardous after repeal, since convictions will probably be more easily obtained for violation of the internal revenue laws and of state statutes governing the liquor traffic than were convictions for violation of prohibition laws that did not enjoy public support. It has been suggested that this factor should make it possible to impose relatively heavy taxes on alcoholic beverages.

The Tariff Question and Possible Shortage of Liquor

Under the present tariff act imported beer is subject to a duty of $1 a gallon ($31 a barrel) but is not required to pay the internal revenue tax of $5 a barrel. Imports of other alcoholic beverages, on the contrary, must pay both duties and internal revenue taxes. Thus a gallon of imported whisky would now be subject to a duty of $5 and a tax of $1.10. This total levy of $6.10 would be increased to $10 if the internal revenue tax should be raised to $5, and to $11 if sold in a state imposing a tax of $1 a gallon on spirits. Prices of foreign liquor may become practically prohibitive if federal taxes thereon are raised and there is no change in the requirement that such beverages pay both taxes and duties.

There have been reports that certain members of Congress would attempt to levy punitive duties on French wines in retaliation for the default of France on war debt payments. While a certain measure of protection for domestic producers is to be expected, it is not believed that the administration will be in sympathy with efforts to impose prohibitive duties on beverage imports. Such tariffs would intensify the difficulty of preventing smuggling. Announcing an allocation of $14,800,000 from public works funds for construction of seaplanes, patrol boats, and cutters for the Coast Guard, Secretary of the Interior Ickes said on September 21 that officers of that service predicted there would be “no decrease in smuggling activities following the repeal of the Eighteenth Amendment and that increased efforts on the part of the smuggling syndicates may be expected.”

The scarcity of aged liquor in the United States will doubtless be urged as a reason for keeping down the tariff on distilled beverages. Dr. James M. Doran, Commissioner of Industrial Alcohol, has reported that present stocks amount to only about 5,000,000 gallons of 17-year-old liquor and 10,000,000 gallons aged from one month to four years. The latter would become available at the rate of about 2,000,000 gallons a year under present regulations requiring liquor bottled in bond to be four years old. New liquor may be sold in barrels, but it must usually be aged at least two years. Dr. Doran estimates that the present supply of 100 proof spirits can be rectified or “cut” to make 50,000,000 gallons of acceptable liquor. Prewar blended liquor was 80 proof on an average, and more than half of the liquor sold was of that type, according to Dr. Doran.

Recent Increased Consumption of Medicinal Liquor

Since March 31, 1933, when restrictions on liquor prescriptions were lifted by act of Congress, consumption of medicinal liquor has increased several times over and prices have been nearly doubled. Distillers have been allowed to step up production accordingly, and it is expected that permission will shortly be given to import spirits to replenish medicinal supplies. A further rise in prices of domestic liquor may be expected after the termination of prohibition. As long as this situation continues and the internal revenue tax remains at $1.10 a gallon, foreign imports will be able to compete with the domestic product. If imports arc not allowed in large volume for a time, a severe liquor shortage would seem inevitable.

Consumption of distilled liquors before prohibition reached a peak of over 160,000,000 gallons in 1917. The following table shows the aggregate number of gallons of whisky, rum, gin, brandy, and alcohol withdrawn on payment of tax in the fiscal years 1910 to 1919.

The rapid growth of state prohibition and the passage of the Reed bone-dry amendment contributed to the reduction of consumption in the latter years. It is reasonable to suppose that annual consumption after repeal of the Eighteenth Amendment will be at least as great as in 1916 and probably much greater.

State Liquor License Fees and Disposition of Revenues

License fees imposed by the new control acts on manufacturers, wholesalers, and retailers of alcoholic beverages are generally moderate and, with few exceptions, lower than the fees imposed on saloons by pre-prohibition high license laws.10 Under the latter statutes the license charge commonly ranged between $500 and $1,000, although in Massachusetts the minimum saloon fee was $1,300 and in some parts of the South reached the prohibitive figure of $5,000 or even $10,000. The range of the new fees is indicated by the table on the next page.

The license fees shown in the table are fixed by state law. They may be added to by charges imposed by municipalities and counties. Most of the laws provide for a division of license revenues between the state and county or municipal treasuries. In Colorado 65 per cent of receipts from all license fees imposed by the law is allocated to the state's old age pension fund. In New Mexico one-half of the receipts is assigned to the counties and municipalities and one-half to the liquor control board. Sums remaining after payment of the board's expenses, which must be held within a fixed maximum, are to go to the state's common school fund.

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Footnotes

[1] The Eighteenth Amendment was submitted on December 18, 1917, ratified by the 36th state on January 16, 1910, and became effective one year later. It was eventually ratified by all the states except Connecticut and Rhode Island.

[2] Of the remaining nine states, Nebraska and South Dakota have arranged to vote on ratification on November 6, 1934. No dates have been fixed for votes in Georgia, Kansas, Louisiana, Mississippi, Montana, North Dakota, or Oklahoma.

[3] Maine and North Carolina will hold their conventions on December 6. Maine voted for repeal on September 11.

[4] See “Preparations for Prohibition Repeal,” E.R.R., Vol. I, 1933, p. 93.

[5] Ibid., pp. 85–86.

[6] Kansas and North Carolina were the only states that went dry in the Literary Digest prohibition poll in the spring of 1932, each by a very slight margin.

[7] See “Preparations for Prohibition Repeal,” E.R.R., Vol. I, 1933, pp. 91–92.

[8] See “Record of the Seventy-second Congress,” E.R.R., Vol. I, 1933, p. 177.

[9] See “Preparations for Prohibition Repeal,” E.R.R., Vol. I, 1933, pp. 94–95.

[10] Ibid., pp. 90–91.

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Special Focus

States Wet before and after Federal Prohibition

Distilled Spirits Withdrawn from Bonded Warehouses, 1910–19

License Fees Imposed on Liquor Manufacturers and Dealers, 1933

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