Most residents would be surprised to learn that under the current system, the state of Michigan buys all the liquor, or “spirits,” distributed here. Our government, via the Liquor Control Commission, slaps its own price markup on liquor before imposing an array of taxes and price controls, effectively protecting the state distribution monopoly.

Residents should insist that the Michigan Legislature take a hard look at this costly and cumbersome system it has protected for decades, in large part because of the excessive political influence of a small handful of individuals who profit from the status quo.

No one would design such a system from scratch today. It was conceived in 1933 out of a perceived need to maintain government control over alcohol sale and consumption following the repeal of Prohibition. State government made itself the sole wholesale agent for all liquor sales in the state. (It very nearly became the exclusive retail agent too, and to this day, unlike for beer and wine sales, sharply limits competition through a quota system for merchants licensed to sell spirits.)

The arrangement was based on a belief that such direct government involvement would protect public health and safety, among other things preventing the distribution of adulterated products like “bathtub gin” from the remaining Prohibition-era bootleggers and gangsters. The system also appealed to prohibitionists who still wanted to limit access to the newly re-legalized liquor.

Nearly 80 years later, the bathtub gin has disappeared, but Michigan’s LCC is still buying and supplying all the liquor consumed in the state, making ours one of 18 so-called “control” states with similar setups. Nevertheless, proponents of the control system still argue that direct government control prevents an array of imaginary tragedies.

Modern scholarship seems to suggest otherwise. To cite one example, a July 2010 paper from the Virginia Institute for Public Policy found no statistically significant difference in binge-related drinking, drunk driving fatalities and total alcohol-related deaths between the 18 control states and the “open” (free) states

In addition, the state isn’t just a direct player in the distribution operation; it also mandates minimum shelf prices under which stores may not sell their products. For example, on June 3, I inspected prices at the Meijer in Coldwater, Mich., (near the Indiana border) and found that half-gallons of Smirnoff, Crown Royale and Captain Morgan sell for $23.96, $53.98 and $26.99, respectively. Twenty minutes south, the same products were available at the Meijer store in Angola, Ind., for $18.49, $47.49 and $21.99, respectively. In other words, Michigan consumers were paying in excess of 20 percent more for the same products. The lower costs in Indiana are probably directly related to it being a free state.

Part of that is the 65 percent price markup the state imposes to ensure its own profit. It then discounts the liquor to retailer licensees by 17 percent so they, too, can make a profit.  Through Sept. 30, 2010, the LCC’s net income exceeded $333 million. Some of this revenue is generated by license and inspection fees, fines and taxes. The money goes to the state School Aid Fund, the general fund, convention facilities and the “Liquor Purchase Revolving Fund,” which pays for the LCC’s own operations.

Many will correctly observe that this amounts to a “sin tax” on liquor. They’re right, but taxpayers and consumers are still being shortchanged by a system that prevents the savings that could be realized by a modern, competitive private-sector supply chain distribution system. Those savings could either be returned to consumers, taxed to provide government services, or some of each.

In other words, this direct government “control” isn’t just an archaic relic: It’s an expensive middleman that imposes a deadweight loss on both the state’s people and government. The state should get out of the distribution of spirits and leave it to the private sector.

Update: Since this story was posted on June 14, the facebook post referenced in the story has been removed from the “Save the Michigan Film Tax Credit” facebook page. To read the original, click here.

In the wake of Gov. Rick Snyder’s sweeping overhaul of the Michigan film tax credit program, there appears to be a “stealth” effort to revive the program — an effort that involves at least one Republican senator.

Trouble is, the effort is not as stealth as perhaps the legislator would like it to be, as it was posted on the social media network Facebook.

Until Snyder’s recently signed business tax overhaul (which goes into effect next Jan.1), filmmakers have enjoyed unlimited tax breaks/subsidies of up to 42 percent of money spent in Michigan on movie production. Last year alone, the state granted tax breaks or refunds totaling $115 million. In contrast, under next year's budget, a much more modest $25 million has been authorized for film subsidies, which was appropriated on an unusual “one-time basis only.”

Film industry supporters immediately took issue — and action — after the governor’s February budget announcement. As with many organizations, causes and special interests, a Facebook page was created called “Save the Michigan Film Tax Credit.” The idea, according to the page’s information, is “simple”:

"A very simple idea. Help us persuade the new governor-elect that the tax credits are worth keeping by telling us honestly about any work or job that you have gotten from a film production that came here. Thank you."

One contributor to this page is Ken Droz, former communications director for the Michigan Film Office. A comment by the outspoken proponent of the previous film subsidy program appeared on this Facebook page on June 8 that mentions this “stealth” effort starting with the 37-1 Senate passage of Senate Bill 383.

A House Fiscal Agency analysis states that “The bill would amend the Michigan Business Tax Act (MCL 208.1455 et al.) to provide for the awarding of smaller film credits.” Basically, this means that the 42 percent refundable tax credit is no longer a guarantee for qualifying movie productions. Instead, the Michigan Film Office could give less than 42 percent in tax credits or refunds if it wants to. For instance, the film office could grant a Michael Moore documentary more of a refund than a Mel Gibson film, or vice versa.

It’s not so much SB 383 that is a big deal. It merely allows the Michigan Film Office to carve up the $25 million film subsidy pie a little differently.

It’s what Droz hints at in his Facebook post that should be of much bigger concern as it relates to the bill’s primary sponsor, Sen. Mike Kowall, R-White Lake:

“As public as it is, Kowall wishes to keep this process quiet and very stealth! As mentioned a new bill should be introduced, SOON, supplementing 383, to continue after Jan. 1, 2012 - with a film fund of approx. $100 million.”

Droz’ comment goes on to say he doesn’t know how the anticipated bill would work, but feels the momentum is positive for film industry supporters:

“But bottom line — Kowall, and Sen. Maj. Leader Richardville are definite supporters of a viable film program, and working many political gears to get it thru the House, and a Snyder signature.”

Kowall has not responded to a request for comment on the Facebook post.

Further exploration found another page featuring “Responses from Legislators,” on which Facebook users posted three letters purportedly from legislators in response to constituents’ concerns about the governor’s plans for the film subsidy program.

From Sen. Tory Rocca (R-Sterling Heights):

“I believe at the very least, we should allow the film credit to remain in place for a few more years, so that we will have a better basis for evaluating their effect on our state's economy. I am hopeful that they will result in more long term investments in Michigan from film makers in the form of permanent movie studios.”

From Sen. Dave Hildenbrand (R-Lowell):

“As for the film credits, please know that I supported the film credit package in the House of Representatives. I believe this credit has created economic activity and excitement throughout our State.”

Rep. Ken Goike (R-Ray Township) was less committal:

“Michigan should have a film industry, but it should also have every other possible industry that we can attract by offering companies an even playing field on which they can succeed in our state….we will have to look at existing policies, including the refundable film tax credits, to make sure they are a sustainable model for adding permanent jobs in our state. Admittedly this may not be an easy task and the outcome may disappoint some, but I believe this is necessary if we are going to put our state back on the path to sustained and permanent growth.”

If nothing else, the “Save the Michigan Film Tax Credit” Facebook page is perhaps an unintended resource for government accountability; now the public knows of an alleged wish by an elected official to keep his activity “very stealth.” This is something to keep in mind given the fact the bill is now in the hands of the Michigan House Tax Policy Committee, which as Droz points out, is “chaired by Judd Gilbert, plus friends Vicki Barnett, Rudy Hobbs & others.”