To Recession-Proof Our Economy, Look to Booze & Pot

In Virginia, liquor sales are up nearly $120 million from last year. Weirdly, liquor sales in Pennsylvania were down almost that much, but net income from liquor sales is up 9.2% from 2019.

You can find similar liquor sales patterns all over the country. In typical Wisconsin fashion, liquor stores were classified as “essential businesses” in March. Same goes for Texas, where I’m based – thank goodness.

Growing up in a dry county in Arkansas, booze was considered pretty taboo in our predominately Southern Baptist community. Even today, when doing research for this column, I found that 39 of the 75 counties in Arkansas are still dry counties. Archaic? Yes. Lost tax revenue? Definitely. I’ll have more on some progressive things Arkansas has been doing in just a minute.

The Pennsylvania Liquor Control Board (PLCB) released the new numbers recently and the decline in sales was due to state-controlled liquor stores and online stores that were forced to close during the pandemic. Those stores have almost all reopened at this point and PLCB officials said they expect to break liquor sales records in the months ahead, as long as those stores remain open.

The Virginia Alcohol Beverage Control Authority reported it had tallied $1.2 billion in revenue during this fiscal year, despite the fact that restaurants and bars were closed for months and are now functioning at very limited levels.

In Oregon, liquor sales are the state’s third-largest source of revenue. And they, like so many other states, are on track for a record-setting year as well.

According to one study by Nielsen, “at-home alcohol” sales have jumped 27% since the pandemic.

Like many of you, I know I’ve spent much more pandemic-time money on boozy items and have been playing with new cocktails. Is it coping? For me, I don’t think so. I’m just entertaining myself. Also, probably like so many of you, I’ve saved so much money while quarantining. So spending a little extra to stay stocked up on tequila, gin, wine, beer and rum has been well worth it.

Despite this boon in booze sales and some significant tax revenue for many states, we are still facing an economic crisis with a GDP decline of 33%, and that’s if we hold our current course during this pandemic.

Which leads me to marijuana money. The House of Representatives passed a coronavirus relief package last month that included provisions protecting banks and credit unions that serve state-legal marijuana businesses. This provision was a step to help keep those financial institutions from being penalized by the federal government. That bill has gone nowhere and Sen. Mitch McConnell (R-Ky.) described the bill as “a parade of absurdities that can hardly be taken seriously.”

This month the House will vote on a full bill to federally legalize marijuana. If it passes, you can guess what will happen to the bill in the Senate. If it’s even considered for a vote, it likely won’t pass with the current majority in place.

The oddity here is that in states where marijuana is legal, pot stores, like liquor stores, have been deemed essential businesses.

And, those legal-weed states have also seen record sales and tax revenue coming in, just like with liquor.

In Oregon, for instance, the state hit an all-time monthly marijuana sales record of $100 million in May. That came after three months of record-setting pot sales during the pandemic. According to the Oregon Liquor Control Commission, that’s a 60% increase over the same month last year. Wow.

Oregon is one of those states that allows online pot orders, home delivery and curbside service. While much of the state’s other tax revenue items, like basically every other state, has been in a freefall, the marijuana tax revenue has been steady and growing. The state expects to bring in more than $260 million in tax revenue from the 17% tax on marijuana sales. Sure, it’s not a large piece of the overall tax pie, but hey, it’s something that’s actually working.

Let’s revisit Arkansas for a moment. While liquor sales haven’t been reported yet and aren’t expected to be breaking any records, the state has witnessed a huge jump in medical marijuana sales. According to the Arkansas Alcohol Beverage Control Division, which oversees 29 operating marijuana dispensaries, Arkansans have spent $143 million on 22,530 pounds of medical marijuana. Also weirdly, in my formerly dry county in Northwest Arkansas, 6,948 pounds have been sold. This is an area, when I was a little kid, where our town and county were dry and our town was still a “Sundown” town. If you don’t know what that is, Google it. It’s too disgusting to even explain.

Arkansas has a 10.5% marijuana tax and since the sales of medical marijuana began last year, it has seen a steady increase in new tax revenue coming in. Progressively enough, 4% of that tax goes to the National Cancer Institute at the University of Arkansas for Medical Sciences, while the rest goes to the state’s general revenue fund.

In Illinois, where legal marijuana sales began in January of this year, state officials have said sales “have been just through the roof.” It’s unclear just how much tax revenue the state has brought in at this point, but officials there have described the new marijuana movement in Illinois as “recession-proof” and “pandemic-proof.”

In places like Kentucky, where alcohol sales are strict and marijuana possession can land you 45 days in jail, officials are looking at a $450 million budget shortfall and are expected to make massive public service cuts and layoffs for state employees.

I’m not saying that Kentucky’s budget problems would be solved by legalizing marijuana. States that have legalized it are also facing some grim budget realities. At the very least, legalized marijuana has provided some much-needed revenue to at least fill a few budget holes.

This year has revealed and/or shined a brighter light on a lot of what’s wrong with many elements of our country: Our public education/university systems, health care, unemployment insurance, wealth disparity, liquor/to-go laws, climate issues, marijuana laws and reliable internet service.

We must take a look at more “recession-proof” and “pandemic-proof” ways of doing business. Credit unions are on the leading edge of those types of business banking services (depending where you live).

There will be an economic reckoning in 2021 as the final tally of the incredible shortfall in federal, state, county and city taxes hits every single one of us.

What are we going to do? Stick to this old road we’re on, or be progressive-thinking enough to future-proof our economy?

Until we decide as voters this fall, I’m going to make a margarita.

Michael Ogden is editor-in-chief for CU Times. He can be reached at mogden@cutimes.com.