One of the more interesting arguments put forth in the WISPIRG study is the claim that the city of Madison’s smoking ban was economically sound.
While it is possible that a localized smoking ban could be good for businesses if the local economy and population was set up to take advantage of a smoking ban, the truth of the matter is that Madison did not see an economic boom as a result of the ban.
The claim itself is suspect to begin with, as WISPIRG doesn’t actually cite economic data; rather they cite license data.
The claim:
“In Madison, the number of licensed liquor establishment increased from 332 in July 2005 (before the ordinance) to 365 in January 2008, an increase of 9.9 percent.”
Is license data really an indicator of success? It’s certainly an interesting indicator, but the addition of new licenses isn’t necessarily indicative of economic growth.
I went through the Wisconsin Department of Revenue’s county/NAICS tax data and pulled the numbers for Dane. What I found was that prior to the ban, the food services and drinking places (NAICS 722) tax revenue showed reasonable growth and then flat lined despite continued increases in reporting establishments.
For instance, 2003-2004 saw an increase in the number of establishments of 5.41% and a corresponding increase in tax revenue of 6.49% (inflation adjusted).
2005-2006 saw an increase in establishments of 3.07% and a corresponding tax revenue increase of only .80% (inflation adjusted).
Interesting? Not really. We know that even an increase in business post-ban usually shows a sharp decline in [taxable] revenue due to declines in alcohol sales. Food sales simply cannot offset alcohol sales losses.
What is of additional concern is the fact that a nearly flat increase in total sales with an increase in the number of reporting establishments means that per-establishment revenues would actually have shown declines and the slight increase in total revenue is only due to the increase in total establishments.
The Madison analysis isn’t complete, but this is my initial breakdown of the data. More to come…
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Liquor sales don’t really show the issue. Liquor stores benefit as more people buy liquor to drink at home, while bar patronage declines, but usually increases in surrounding areas where patrons can smoke.
Bob, that is true – however I am not counting liquor retail sales. My numbers are strictly from food and drinking places (i.e. restaurants and bars) and don’t factor in off-sale purchases.
It’s possible, that restaurants without liquor licenses, anticipating a decline in food sales due to the ban, tried to offset that anticipated decline by becoming licensed to sell alcoholic beverages, which is more profitable. A study done by the University of Wis. found that bans always impair employment in the bar industry.
http://kuneman.smokersclub.com/PDF/viewcontent%20cgi.pdf
Dave K
[...] the new license claim that was originally addressed in part 3, I decided to actually look into the new licenses that were actually granted in the time period [...]