Virginia to Privatize Liquor Sales

Virginia Governor Robert F. McDonnell (R) released his proposal to privatize Virginia’s 76 year monopoly on liquor sales. The effort is ostensibly meant to live up to his promise to fund transportation in the state without raising taxes. Now the major challenge is to convince Virginia residents and legislators that his new plan is not merely adding new taxes, regardless of the new set of fees—including a 2.5% tax on restaurants and bars that go through wholesalers rather than retail outlets to obtain their liquor—that come along with the privatization plan.

After the sale of the state’s 332 liquor stores, the deficit in profits will come from charging taxes and fees on liquor sold in bars and restaurants. The drink surcharge would likely result in an extra tax on customers or on liquor sales’ receipts.
The plan has gotten the support of several business groups (for its free marketeering) as well as the consternation of faith groups (because of the projected tripling in the number of liquor stores) and restaurateurs (because of the higher cost of liquor in restaurants and bars that would come as a result). McDonnell’s own Republican Party is split on its support because the proposal includes three items in particular referred to as “taxes”, as well as a number of other fees.

Primarily, the income from the plan to be used on transportation would be a one-time windfall of $458 million and an additional $229 million from the aforementioned fees and taxes. However, the income made by the state on their liquor stores at least meets the expected profits, which leads some opposition lawmakers to suggest that the whole plan is more ideological than practical. Many liquor control states have had similar laws controlling liquor sales on the books since the end of prohibition, as a way to curtail drunkenness in response to the lingering temperance movement.

Some have questioned the wisdom of a plan that is estimated to triple the number of liquor stores as a manner of helping the traffic woes of the state. The more progressive Northern Virginia has had a large number of outspoken objections to the plan, especially notable since it is their region that suffers from the worst transportation issues. However, the privatization of Virginia liquor sales will likely garner further support in the conservative base of the state, if the Governor can succeed in convincing people that the new set of fees are not actual taxes. The fact that they are specifically called “taxes” is a hindrance to his case.

A Washington Post survey of other states that have privatized liquor sales reported that revenues that resulted in similar plans have fallen short of expectations.