Jeff Smith - A Shot at Leveling the Playing Field

Rules and regulations often get a bad rap. They can be onerous, outdated, or both. But at their best, regulations are put into place to ensure the safety of our communities, often in response to new technologies or evolving economies.

Occasionally regulations are implemented with foresight, but it’s not easy to predict how our society will change in advance. Regulations are oftentimes put in place because accidents occurred, or unscrupulous people cheated others.

I have the honor of serving on the Senate Committee on Universities and Revenue. At a public hearing last week, my colleagues and I heard from the public on two bills which propose changes to the way our state regulates alcoholic beverages and related industries.

Wisconsin’s system for regulating alcoholic beverages is called the three-tier system. It governs how manufacturers, wholesalers and retailers of alcoholic beverages can relate to each other. The three-tier system prevents members of one category from having business interests related to the other categories, as well as preventing monopolistic practices.

This system evolved in the wake of Prohibition, when states were charged with developing alcohol regulations from scratch. As the industry has evolved since then, many exceptions have been made to the system, such as tap rooms and distilleries.

Because of the patchwork nature of this system, the three-tier system needs updates. Some of these changes are an effort to keep up with evolving technologies, while some are closing loopholes people have found to skirt the law.

We heard about new machines that turn alcohol into mist that is then inhaled. Ingesting alcohol in this way introduces it to the bloodstream faster, leading to concerns that consumers will inadvertently give themselves alcohol poisoning.

Another very different technology allows businesses to evade taxes. This software, referred to as an automated sales suppression device, or “zapper,” falsifies records of transactions in order to misrepresent sales.

The legislation considered even touched on eliminating loopholes in lottery regulation. Some lottery winners have attempted to transfer their winnings to someone else, sometimes for altruistic reasons. But we’ve also seen winners transfer their earnings in an effort to avoid paying back taxes or child support. The passage of this legislation would make this kind of evasion a felony.

But the largest piece of legislation brought to the committee would overhaul the regulations overseeing the three-tier system. These changes are meant to create clarity by standardizing the hodgepodge of alcohol regulations put in place over the last century.

New innovations within the industry such as wineries and tap rooms spurred these changes. The current three-tier system does not easily accommodate these types of businesses.

Wedding or event barns are another type of establishment where regulation has lacked standardization and predictability. Currently these seasonal event venues are not licensed to sell alcohol and don’t fit easily into the laws as written.

We heard from many event barn proprietors who are already doing the right thing by contracting with licensed alcoholic beverage suppliers and servers. This legislation is aimed at the bad actors who do not already abide by industry standards of safe serving and age restrictions on alcohol consumption.

There are a lot of stakeholders interested in the outcome of this legislation, intended to level the playing field. It has been very difficult to bring everyone to the table and get them on board. Between the taverns, wineries, craft brewers, distillers and wholesalers, there has been a lot of give and take involved in these negotiations.

These solutions are not perfect, and nobody is completely satisfied. The commonality among all these groups is their recognition that alcohol should be regulated to protect the consumer, and these regulations should be clear enough for manufacturers, distributors and retailers to abide by the rules.

Creating new and accurate definitions and fitting them into a comprehensive and comprehendible set of rules without unduly burdening Wisconsin businesses should be the goal. The process of negotiating this bill is an example of what can be accomplished when we come together and compromise. As a legislature, we should continue to push for solutions that work for and advance the safety of all Wisconsinites.

Senator Smith represents District 31 in the Wisconsin State Senate. The 31st Senate District includes all of Buffalo, Pepin and Trempealeau counties and portions of Pierce, Dunn, Eau Claire, Jackson and St. Croix counties.