End State Monopolies on Liquor Sales

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


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.