Virginia Continues to Soak Its Alkies, But Maybe Not for Much Longer


Things the governor of Virginia is in charge of: 1) governing, 2) speechifying, 3) selling whisky.

Virginia Gov. Bob McDonnell is trying to get his state out of the booze biz. He campaigned on privatizing retail liquor sales—the state currenly owns, operates, and stocks all liquor stores within its borders—and has proposed using the one-time windfall from permit fees to pay for road construction. McDonnell is calling a special session of the legislature to deal with this issue, but it isn't going to be easy.

Here's the sticking point:

In the District and most of Maryland, just a dollar or two from a fifth of Jack Daniel's goes to government. But in Virginia, where whiskey and every other kind of liquor is sold in state-run stores, more than $13 of the retail price goes to the state.

Two possible reactions here: 1) Oh no! Virginia state revenues may be negatively impacted by privatization! (Or not! Depending on how we set tax levels and account for pension obligations!) or 2) Why is the state of Virginia getting $13 every time I buy a bottle of Jack?

Personally, I'm inclined to focus on the second point. As the Washington Post piece quoted above notes, other states take something more like a tax sip than a tax gulp. Just because Virginia has been soaking its citizen alkies for 76 years doesn't mean it should continue doing so. Anyway, McDonnell will be putting together a package that doesn't take much of a bite out of state revenues, at least in the short run. That means customers probably won't see a big drop in prices on the basics, but selection as well as store locations and hours will improve. Plus, as a booze snob I was glad to hear that "the prices of high-end items will fall, resulting in additional sales and increased tax revenue."

There's a throwaway line in the Post piece that deserves a little more attention:

Store owners buy Jack Daniel's from a wholesaler, not the distillery.

Private stores wouldn't buy from wholesalers because they are a bunch of dummies who enjoy paying extra for a middleman. They would do so because the state has a monopoly on liquor wholesale and they will be forced to do so. Another privatization project for further down the line, Gov. McDonnell. (UPDATE: Meanwhile, a move is a afoot on Capitol Hill to insulate state-protected wholesalers from challeneges.)

Maybe Virginia needs a sponsor. You know, guidance from a state that has been through this already. Someone to help get Virginia though the long legislative nights. Iowa? West Virginia? I'm looking at you to step up here.

I've written about getting Virginia off the sauce here.