Fuzzy Numbers: Gov Bob McDonnell and His ABC Plan

Yet another mathematical analysis of the Governor’s plan to privatize the state’s ABC  operation clearly demonstrates why citizens are showing  no enthusiasm for his illogical plan.  This is particularly important because even with dramatically higher taxes the plan will mean no additional revenue will be generated for expanding state services for things like health care or substance abuse.

Virginians are beginning to ask what we get for the tax dollars generated under a 1000 liquor store plan; increased domestic violence, lost wages, property damage, and a further strain on the criminal justice system.  This is not exactly a bargain for losing one of the most rock solid state programs that is generating revenue for Virginia.

The analysis was conducted for the beer and wine industry by Robert W. Cook, Ph.D. a longtime faculty member at the University of Richmond and former chairman of the University’s Economics Department.  Dr. Cook’s analysis reaches four basic conclusions about the Governor’s privatization plan:

  1. Prices Virginians pay for liquor will rise MORE THAN 16% PER GALLON.
  2. Spirits excise taxes WILL INCREASE BY 42% PER GALLON under the Governor’s plan.
  3. The Governor’s plan changes the way liquor is taxed at the wholesale level, substituting a $17.50 per gallon excise tax for the current tax rate. The cash register impact of this change means that the current effective tax rate of $12.27 per gallon increases to $17.50 per gallon.  That’s $5.23 PER GALLON in new taxes which will result in higher retail prices.
  4. The per-gallon excise tax is inefficient and will be less effective at generating revenues for the state with inflation over time.

Dr. Cook assumed that future liquor sales remain the same as those in FY 2010 which is consistent with what Bob McDonnell and his staff have been promising in their statewide public relations pitch-tour.  The claim is that increasing the number of retail outlets where distilled spirits are sold by 300% will not result in more drinking.  (For the record, that makes us raise an eyebrow as well.)

Sign the faith coalition’s petition to tell legislators that Virginia does not need to expand the number of liquor stores in Virginia to 1000 at www.yourvaluesyourvoice.com.  These fuzzy numbers provide no benefit for every day Virginians.

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