Alcohol

End State Monopolies on Liquor Sales

It's time to get the state out of the booze business.

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Virginia made a big mistake four years ago when it failed to end the state's monopoly on liquor sales, and its residents are going to pay the price for that — again.

So far in 2014 Virginia has hauled in 6 percent more revenue than it had by this point last year. But lawmakers had planned to spend even faster, so the state faces a budget shortfall. To help close the gap, Gov. Terry McAuliffe ordered the Alcoholic Beverage Control Board to raise prices. The ABC also is under a mandate to hike its profits, from last year's $140 million to $145.3 million in the second year of the current budget. (That doesn't count the $200 million Virginia collects in taxes on liquor.)

Higher prices don't guarantee more revenue, though. Raise them too much, and consumers might just change to a cheaper brand. In any event, looking at liquor as a revenue source is the primary problem to begin with. It's the principal reason lawmakers couldn't agree to privatize the state's booze business back in 2010, when Gov. Bob McDonnell proposed the idea.

McDonnell also muddied the issue by pitching privatization as a means of raising revenue for roads. That opened the door to a distracting digression over the mathematics of competing transportation funding proposals, and gave Democrats who didn't want to hand the governor a victory plenty of fodder in addition to all the other anti-privatization arguments.

Many of those, by the way, were a hoot. Opponents of privatization argued that national big-box retailing chains would gobble up all the liquor licenses, leaving none for anyone else — and that seedy, low-rent liquor stores would sprout on every corner like weeds after a spring rain. They fretted that taxes on consumption could never hope to make up for lost ABC profits — and that liquor consumption would skyrocket. They argued that liquor was vile, nasty stuff — and therefore Virginia ought to be the one to sell it, which makes as much sense as state-run sales of cigarettes or porn.

On top of those contradictions, opponents marched out a parade of horribles with no basis in fact. Privatization would lead to more teenage drinking, they said. And to more binge drinking, and more highway carnage. But Virginia is one of only 18 states that monopolize the sale of liquor. And as the Virginia Interfaith Center, which opposed privatization, acknowledged: "although alcohol consumption is slightly higher in private sale states, there is no difference in the rates of underage drinking, underage binge drinking, and alcohol-related traffic deaths between license states and control states."

Across the country on the West Coast, critics also warned about a parade of horribles when Washington state debated ending its liquor monopoly in 2012. But after privatization passed there, the horribles failed to appear. Washington liquor sales rose 6 percent in the first year — "a bit less than state forecasters had expected," the Seattle Times reports, "and far less than what critics feared." Moreover, "the most recent data point to volumes being relatively flat from last year."

Big-box retailer Costco did get into the liquor game, and has one-tenth of the Washington market. But plenty of other businesses have done the same. Washington now has 1,400 places where you can buy hard spirits, compared with only 329 state-run stores before. Restaurants are happy, too. Instead of having to send an employee to an assigned distribution point, they can have bottles delivered by distributors who compete for the business by offering discounts.

Unfortunately, consumers have not enjoyed a similar benefit. Store prices actually have gone up. Don't blame greedy proprietors, though; blame greedy politicians. The Seattle paper says the reason for higher prices is the "fees created by the privatization initiative to make the state whole after giving up its monopoly. Those include a 10 percent fee paid by distributors … and a 17 percent fee paid by retailers."

Instead of trying to shake more money out of Virginians' pockets, the commonwealth should follow Washington's lead and sell off its liquor business. But it should not adopt Washington's deceptive practice of trying to claw back its money through hidden fees. So how can Virginia lawmakers scrape up the revenue that would be lost?

Simple: Legalize recreational marijuana, as four other states have. Washington did, and expects to collect $637 million in licenses and taxes by 2019. Colorado hopes to reap $174.5 million over the next three years. By one estimate, legalizing weed in Virginia could raise as much as $500 million for the commonwealth. But even half that would more than make up for ending the liquor monopoly.

True, there are many arguments against the state letting people smoke pot. But those same arguments work just as well against the state letting people drink booze — let alone selling the stuff itself.

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  1. Opponents of privatization argued that national big-box retailing chains would gobble up all the liquor licenses, leaving none for anyone else

    Sounds like a good case for doing away with caps on the number of liquor licenses, or better yet, doing away with the liquor licenses altogether.

    1. Agreed – most “licenses” for businesses are completely bogus, exclusionary and based upon a massive misrepresentation of the power of government on the local and state level.

      If the government needs to collect taxes I am all for it – Government is necessary for the orderly structure of society. But it has no business telling anyone that they can or cannot run a business as they like or even at all,

  2. Nothing about Ginsberg’s ticker trouble?

    Come on reason! Obama’s going to appoint an avowed Communist!!!!11!!1

    1. Po-TAY-to, Po-TAH-to…

  3. Higher prices don’t guarantee more revenue, though.

    The most populous part of Virginia is on a state line, and not just any old state line, but a state line with a jurisdiction that has relatively laissez-faire liquor regulations. But no, there’s no reason why higher prices would make Virginians rethink their purchases.

    Opponents of privatization argued that national big-box retailing chains would gobble up all the liquor licenses, leaving none for anyone else

    And that would be way worse than having the Commonwealth gobble up all of the liquor licenses, leaving none for anyone else.

    1. The most populous part of Virginia is on a state line, and not just any old state line, but a state line with a jurisdiction that has relatively laissez-faire liquor regulations. But no, there’s no reason why higher prices would make Virginians rethink their purchases.

      people still get charged with bootlegging in this state.

    2. The most populous part of Virginia is on a state line, and not just any old state line, but a state line with a jurisdiction that has relatively laissez-faire liquor regulations. But no, there’s no reason why higher prices would make Virginians rethink their purchases.

      people still get charged with bootlegging in this state.

    3. I’m right in the middle so no border running for me… luckily I brew my own alcohol. ;p No distilling though, I’m just not in to drinking liquor.

  4. Opponents of privatization…

    …are hysterics to whom we should not listen. I want free market booze.

  5. Opponents of privatization argued that national big-box retailing chains would gobble up all the liquor licenses, leaving none for anyone else ? and that seedy, low-rent liquor stores would sprout on every corner like weeds after a spring rain.

    so which is it?

    1. “Shut up,” they explained.

    2. Never underestimate the power of doublethink.

  6. Hi, Pennsylvania here. Just hanging out. If you need me, I’ll be over here.

    1. Hey, thanks for being there. But if you don’t mind, I’d rather talk to Louisiana.

  7. Be careful what you wish for. Washington state privatized liquor sales a few years ago only to see prices go up, as the initiative had much higher taxes on the liquor hidden in the bill. People wanted to be done with the state monopoly so much they did not read the fine print.

    1. Still an improvement, it’s easier to demand a tax decrease later than it is to get full privatization. That’s a big first step that VA just hasn’t been able to make, politically.

  8. Hey, I have an idea! When the government is facing a shortfall, why don’t the officials take a long, serious look at what they can cut, instead of scrambling around for ways to squeeze it out of the citizenry? We could even hook the budget to their salaries, so that if there’s a budget shortfall, and they aren’t willing to cut enough, their salaries get town into the gap for the duration of the “emergency”.

    I know, I know, “Actually CUT government?!? That’s CRAZY TALK!”

    As for the “booze is dreadful” crowd, we could put the State governments that insist on injecting themselves into the business in charge of distilling the stuff, thereby guaranteeing widespread shortages.

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  12. Why did Corbett lose? He must have sucked real bad to lose to a Democrat during a GOP wave.

      1. You should seek some help. Or drink Drano.

    1. Yes, Corbett did suck that bad. He talked about a bunch of good stuff like privatizing liquor sales, but managed to get none of it through the legislature.

      No property tax reform, no privitization of the turnpike, nothing. Well, Pennsylvania has casinos now so I guess that counts for something.

      He was also accused of sandbagging the Sandusky investigation during his tenure as state AG, and I think he did sandbag it.

      1. Was it his fault almost nothing got through the legislature?

        1. I don’t live in PA anymore, so I don’t know all the ins and outs of the state politics. I don’t know if he shot himself with the legislature or not. I did read in newspapers and letters to the editor lots of criticism of him and his inability to get things through the legislature. Regardless of where fault actually lies, some very vocal folks saw it as Corbett’s failure.

  13. MD liquor stores are filthy. MD restaurants/liquor stores are also sub-par. I guess they spend more money on licenses than on janitorial staff.

  14. which makes as much sense as state-run sales of cigarettes or porn

    *shudders at the thought of government produced porn*

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  17. Why did he leave out Pennsylvania? Our system is worse than Virginia’s.

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