Gov. McDonnell is trying to gain support for his plan to privatize liquor stores in Virginia which have been run by the state since the end of Prohibition. Gov. McDonnell announced this when he was the Republican running for governor in 2009, but now he is trying to work out the details to implement it.
Like much of the country, Virginia has financial problems, and Gov. McDonnell sees the closing of the state run liquor stores as a way of solving those budget woes. Virginia has term limits which allow a governor only one term, so Gov. McDonnell only needs to make this program practical for a few years, long enough to get credit for solving the budget crisis, and to get another Republican elected as a result. For those of us who live in Virginia, however, the long term effects are more important than the quick fix.
It is a concern that different groups are questioning the wisdom of this plan, including people in both parties, community leaders, and business owners. The Washington Examiner wrote about the possibility that making alcohol more readily available to the public will increase the consumption of alcoholic beverages in the state. An Associated Press article from Business Week described the concerns of a local whiskey distiller that smaller local distillers will be unable to compete for shelf space with the nationwide brands. Of course, retailers are in favor of the plan.
One early Virginia distiller of whiskey was George Washington, who had a very profitable distillery on his plantation. As Mount Vernon produced larger quantities in each of the years before George Washington’s death, his company would hardly qualify as a small business, but Washington’s business sense would probably have him eager to keep the control and profits to himself.
Virginia currently gets $250 million in taxes and profits from their liquor stores, but Gov. McDonnell plans to get as much as $500 million for transportation from his plan, according to Anita Kumar in the Washington Post. The state will save money by closing over 300 stores and the warehouses it now operates and selling the properties. It will also get another windfall income by auctioning liquor licenses. Taxes on liquor sales will continue, and a controversial tax on alcoholic drinks in restaurants and bars has been proposed.
The Washington Post surveyed some states that have privatized liquor sales, and reported that Iowa, West Virginia, and Maine generated much less revenue than expected. Gov. McDonnell believes his plan will be more effective and will not have the flaws of plans in other states. The cost of liquor in Virginia is higher than in the surrounding states, so those in Northern Virginia have the option of buying at a better price and convenience in Maryland or Washington, D.C. But the affects on those of us living and working in Virginia go much further than the ability to buy liquor more conveniently and at a better price. If this plan doesn’t work, and the revenue does not continue to be generated, where will the money for roads come from? Will other taxes on businesses and individuals have to be raised to make up the deficit?
As a new resident of Virginia a few years ago, and one who enjoys a glass of good bourbon, I had to get used to the fact that I couldn’t go into Costco, a grocery store, or a wine shop and buy a bottle of liquor. It seemed a minor nuisance to search out a state run ABC store to buy rum for dessert recipes or summer drinks. The current controversy has given me more to consider than the inconvenience of making separate trips to find one of the state stores. The taxpayer in me is concerned about the effects of this plan, the Democrat in me is reluctant to side with the opposing party, but the bourbon drinker and free enterprise supporter wishes Gov. McDonnell success. I would like to see a plan that gets the state out of this commercial business enterprise, but I still have questions about how to accomplish that.
Sources: Business Week, Washington Post, Washington Examiner, and personal experience.