Privatizing is worth a shot

lewleadbeater.com

notes from the edge

Home

Email Me

				THE
Column Archive				VIRGINIA GAZETTE
				WILLIAMSBURG, VIRGINIA
Privatizing is worth a shot				August 25, 2010

I have to admit that I’m not a big booze fan. Except perhaps for rum, booze generally tastes like rancid vinegar unless you add something like Pepsi to it, and what’s the point of that? Besides, booze makes your mind go loopy, which I suppose is why the Senate’s cash bar is so popular.

No, I’ve always been a beer drinker, since beer is food and, if you’re in some foreign country like Mexico or Guatemala, it’s an excellent substitute for water. Tecate beats agua every time when it comes to fending off Montezuma.

Nor am I a big fan of most of the proposals that Gov. Bob McDonnell has been slinging about. But I have to say that his plan to get the state out of the monopolistic booze business has definite merit.

How or why the state got into the booze business I have no idea. I suppose that after Prohibition some states considered booze one of the necessary evils they had to deal with, and what better way to do that than to regulate its distribution by making the state the sole purveyor of vodka and whiskey?

That nifty notion was soon followed by the realization that, though we all know what nasty results accrue from drinking spirits, we’re actually making big bucks from this operation. So why give it up? Bottom line trumps walking a straight line any day.

And this seems to constitute the main opposition to McDonnell’s proposal. Why give up a goose that lays such big golden eggs each year?

Well, one reason is convenience. Why is it that beer aficionados or those who prefer an piquant Virginia wine can go to any supermarket and pick up their drinks, while vodka vaunters have to truck all over the place in search of some little hole-in-the-wall ABC store that may or may not exist anywhere near their homes? Talk about discrimination.

Secondly, the economic argument is weak. Indeed, most states that have given up running ABC stores have found that their revenues have increased as a result of privatizing the booze business. Take New Jersey, for instance.

In that state, private liquor stores, which may also sell beer and wine, are licensed by the state. License fees, depending on the operation, can be extremely lucrative and in some instances run anywhere from $50,000 to $1 million. Distribution of liquor likewise has been privatized, and distributors pay a hefty $5.50 tax to the state for every gallon of liquor they sell.

Consumers of distilled liquor pay a 5.5% tax on their purchases in addition to the regular 7% sales tax.

Whereas in 2009 Virginia’s net profit from booze was $111.8 million, New Jersey, thanks to a recently passed 25% increase in liquor taxes, will net upwards of $130 million a year in taxes alone, excluding license fees.

As a result, the state relieves itself of the necessity of maintaining its own stores and hiring personnel, and it gets itself out of the cumbersome business of distribution. At the same time, it can regulate fees and taxes and, based on population, set up quotas for the number of liquor stores it will allow in any given community. And there is now talk of permitting supermarkets to sell liquor, in addition to beer and wine.

While so-called fiscal conservatives may shudder at the idea of instituting a system of taxation to get out of the booze business and shift to privatization, the fact is that, like the constantly rising cigarette taxes, such monies provide a beneficial and steady income for the state that may equal and eventually surpass what it takes in now from its own stores.

I say it’s worth a shot. Get the state out of the booze business, encourage the development of small liquor businesses and give the whiskey whiffers a break at the gas pump.