Quotas for intoxicant businesses in 1933

When Prohibition was repealed, the federal government was deluged with applications to import liquor.  Granting quotas to all applicants seemed likely to create a situation where “nobody would have got enough to do business with.”

There are various ways of dealing with excess applicants, like holding a lottery, as Washington state is doing; selling licenses to the high bidder; or, as the Roosevelt Administration did in 1933, considering each application on its merits and deciding yes or no for each application.  Here are details, with highlights bolded, stated by the head of of the Federal Alcohol Control Administration:

When the Federal Alcohol Control Administration was first designed, it was intended that the work of allocation of these [liquor importing] quotas should, until the new organization was well started, that is until February 1, be carried on by a committee of two, one designated by the Secretary of Agriculture and one designated by the Secretary of the Treasury.

They started the work, and it was then realized that it had so close a connection with the Federal Alcohol Control Administration work [quoted material above from page 29; below from page 30] that it was not safe to have it done by a separate body, and accordingly it was dumped on the administration–on the Federal Alcohol Control Administration, the F.A.C.A.

That has been a considerable task.  I suppose people have allotted quotas before among an industry, but they have never been called upon before to allot quotas among an industry which did not exist.  We had nine hundred or a thousand applicants, many of them purely speculators, in fact with no connection with the importing business, with no resources, no means of distribution, and no responsibility, all clamoring to get into the importing business.

If we had simply distributed the quotas among them all on anything like an even basis, nobody would have got enough to do business with, and the whole thing would have been disorganized.

Accordingly, a system had to be worked out and each application considered separately on its merits and I had to deal with each of these.

Statement of Joseph H. Choate, Jr., of the Federal Alcohol Control Administration, December 12, 1933, Tax on Intoxicating Liquor, Hearings Before the Committee on Ways and Means, House of Representatives and the Committee on Finance, United States Senate, 73d Congress, Interim, 1st and 2d Sessions124 (Dec. 11-14, 1933), pages 29-30.  Photo:  Part of page 30 Choate.  Photo of cover:  1933 Liquor Tax Hearings Cover.

Background on Joseph H. Choate, Jr.:  He “chaired the Voluntary Committee of Lawyers, a group established in 1927 that promoted the repeal of prohibition. Upon repeal in 1933, President Franklin Roosevelt named Choate the first head of the Federal Alcohol Control Administration (FACA).” http://en.wikipedia.org/wiki/Joseph_H._Choate,_Jr.  So having him say who got licenses would be like having Alison Holcomb decide who got licenses in Washington.  Not a bad idea, maybe —  if she would accept the mission.

 

 

 

 

 

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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