Wednesday, February 25, 2009

Instead of Raising Taxes On Alcohol

I've talked about this here before, under the watchful eye of Madison Rep. Teresa Berceau (and current, though presumptively not perpetual, Dane County Executive Kathleen Falk) there is a strong push here in Madison to raise beer taxes. The reason given for wanting to raise taxes is much like the excuse given by the Oregon legislature – alcohol places a heavy tax on society because of the financial burden on the health care and law enforcement agencies. They argue that a raise in taxes could help to fund health care for alcohol-related physical and mental health issues, and would help pay for more cops and district attorneys to prosecute DUI cases. The case for taxing beer specifically is rather strained, but basically boils down to: everyone drinks a lot of beer.

I'm not going to talk about that today. Well, sort of. This post came about rather interestingly. I was trawling some beer-industry sites and I noticed a note from October about a Utah Supreme Court case that contrasted with a New Jersey case over what constitutes "visibly intoxicated" such that the state's Dram Shop Act would impose liability on the tavern owner (and servers) for serving someone who eventually causes physical harm (usually car accidents, but it would also include injuries related to bar fights, etc.). The New Jersey case, a trial court case, held that tavern owners could be held liable for damage "even if the driver did not consume alcohol in the bar or appear intoxicated." The Utah Supreme Court held, however, there must be "objective facts indicating a reasonable likelihood of endangerment based on the particular circumstances." These are two opposite ends of the spectrum.

The general rule of law in every state in the United States, including here in Wisconsin, is that tavern owners (or social hosts, or really, anyone serving alcohol to another person) are not liable for serving drinks to people who then go out and cause damage. It's a simple rule that has its basic roots in proximate cause – or the idea that the tavern owner would never serve drinks if they knew that the victim of anyone they serve drinks to who then caused damage could sue them for serving the liquor that may, or may not, have contributed to the problem in the first place.

Most states also have an exception to this general rule. The gist of the exception generally goes something like this: the person who subsequently left the bar and got in a traffic accident that caused injury was so obviously wasted when he left that you, the tavern owner/server/social host, should have known he was drunk and prevented him from getting behind the wheel. This is called a Dram Shop Act. And this is where the dispute between New Jersey and Utah rears its head. New Jersey, like Illinois, has a very broad Dram Shop Act; Utah, Minnesota, Michigan, and Wisconsin all have very narrow Dram Shop Acts.

For example, as discussed above, apparently New Jersey will impose liability on a tavern owner even where it wasn't the driver who was visibly intoxicated! In that case, it was the passenger who was visibly intoxicated, which then triggered a duty for further investigation by the tavern owner to prevent the passenger from driving home. The argument in that case is, that while the driver wasn't visibly intoxicated and had, in fact, been drinking soda at this particular bar(!), investigation of the passenger would have revealed that the driver was intoxicated also and the bar should have prevented either of them from driving. If that sounds rather strained to you, well, it seems a bit strained to me, too – and it is quite strict and abnormal.

On the other hand, in Utah, the plaintiff (generally the victim or alcohol board seeking to impose liability on the defendant tavern owner), must prove that not only was the person "visibly intoxicated", but must also "demonstrate proof of potential danger either to the [driver] himself or to others. … The proof of potential danger requirement has been met in cases where the individual was walking down the middle of a street, buying tire chains and indicating an intent to drive, arguing in the middle of the street and resisting arrest, and sleeping in a car in front of a lounge, presenting the likelihood that the individual would wake up and drive home. But it was not met where the individual was in a private driveway leaning on the back of a vehicle." In other words, the victim must prove not just that the tavern owner noticed that the person was "visibly intoxicated" but also witnessed some event (such as grabbing car keys) that would indicate potential danger.

Clearly then, Utah presents a stronger standard of proof for imposing liability on the tavern owner than that of New Jersey. New Jersey requires the tavern owner to undertake positive duties to investigate whereas Utah requires the plaintiff to prove that not only was the driver visibly intoxicated, but that the tavern owner knew this and the tavern owner saw the driver grab car keys or undertake some action that would indicate potential danger.

Both of these standards are more lenient than Wisconsin's statute which only imposes liability on a tavern owner/social host if the driver is underage and the tavern-owner wasn't given a fake ID!

So, what does all of this have to do with taxes? Well let's first take as a given that imposition of Dram Shop liability on tavern owners would increase the awareness of tavern proprietors on the drunkenness of their patrons (I readily admit that this is not something that we should probably take for granted, but raising the discussion would draw out the statistics and this post is already long enough). The Dram Shop Act would impose a legal duty on the proprietors to prevent said adult drunks from driving. Before you say "but the tavern owner can't keep the drunk there against his will" these laws typically have funding for taxi/ride provisions that the tavern can call a taxi and the ride is paid for if the patron can't afford it. Moreover, if the drunk is belligerent and refuses the cab, the tavern can, and should, call the cops.

By imposing liability on the tavern owners we help to diminish the incidence of drunk driving; particularly by the worst offenders. But, apparently, for all of the talk of reducing drunk driving, Wisconsin is not interested in actually reducing drunk driving, we're merely content to fund the problems that are a consequence of drunk driving. So, we don't set up any deterrence to drunk driving: we don't allow random traffic stops or have a reasonable Dram Shop Act.

We would rather tax the alcohol industry to pay for the hospital bills of the victim than prevent the occurrence of victims in the first place. The Tavern League is one of the most powerful lobbies in this state, they will not roll over and just allow the imposition of a Dram Shop Act. But there are a number of things that can be done that would still help, would still impose some Dram Shop liability, but could ameliorate the burden on the tavern owner. For instance, the legislature could impose requirements like Utah's that require a stiff burden of proof by plaintiffs. The legislature could do what Illinois does and cap liability. But, the state can't simply pay lip service to reducing drunk driving, and then kowtow to the lobbyists looking to place blame, or the financial burden, elsewhere.

Is the Dram Shop Act ideal? No. It's not. But tavern owners are situated to spot problem drunks and to continue to serve them even after they are obviously inebriated is careless at best, and negligent at worst – and to let the tavern owners hide behind an outdated legal shield is endangering our roads. Heck, remove the immunity and require proof of causation; it need not be absolute liability, but it needs to be something. The populace will not take drunk driving seriously until the state does.


  1. Don't you mean "less lenient" than Wisconsin's statute?

  2. The Tavern League is far, far too powerful. I'm all for raising the beer tax and improving the Dram Shop Act, Tavern League be damned.

  3. Brettspiel: "more lenient" as to victims (e.g., victims have recourse in NJ and UT, but no recourse in WI), "less lenient" as to the taverns.

    Admittedly confusing, I caught in editing and went ahead with it. Maybe I should have re-worded it to be more clear.

  4. Hey Brettspiel, the cheapest way to get rip-roaring drunk is to buy bottom-shelf spirits. Raising the beer tax won't accomplish anything related to public safety.

    Even as a future pub owner (hopefully), I agree with MBR that placing some liability on tavern owners would probably reduce drunk driving. I'm all for absurdly stiff penalties for drunk driving, as well. They're both much better alternatives to penalizing responsible drinkers.

  5. It may not do anything to improve public safety, but that's not the only reason things are taxed. It would be nice boost to the revenue stream for a state with a rather large budget gap. The beer tax hasn't been raised in what, 40 years, thanks to the Tavern League? That's unprecedented as far as I know.

    Sure, we pay a lot of taxes in this state already, but this is more of a big picture issue, I think. A bump of a couple cents a bottle isn't going to put a noticeable dent in my beer budget, and I'll bet the same holds true for everyone reading MBR. I don't quite understand the opposition to this tax (aside from the opposition to taxes in general). This is a tax that (it seems to me) has been artificially suppressed in this state at the whim of a powerful lobbying group, for their sole benefit, and at the taxpayer's expense. It is a fair tax and the burden on the individual taxpayer is small.

  6. I can't speak for other people, but here are my issues with beer taxes:

    -Like you suggest, they make it harder for poor people to drink beer but don't have much affect on rich people.
    -They create a competitive advantage for large breweries (I'm thinking along the lines of Capital vs. Ale Asylum) because their sales volumes and economies of scale make it easier for them to keep their prices low.
    -It requires a fraction of the population (beer drinkers) to pay for everybody's government.

    Historical precedence be damned; I don't think excise taxes should have ever existed. If I was in charge, and maybe this would mean that I wouldn't be in charge for very long, I'd raise income taxes and get rid of everything else.


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