Privatizing booze

US: Will those good old boys soon be drinking their whisky and rye more cheaply in Virginia? Yes, if Governor Robert F. McDonnell has his way. McDonnell wants to privatize the sale of hard alcohol — even though the liquor business currently brings in millions in tax dollars.

In Virginia, all types of alcohol are sold in state-run stores. The state buys its best-selling whisky, Jack Daniel’s, from the distillery in Tennessee for $11.48 for a 25-ounce bottle. Then the state adds a warehouse-processing fee of $1 to every 12-bottle case. The Alcoholic Beverage Control board (ABC) marks up the price by 69 per cent, and a 20 per cent excise tax increases the price yet again. In the end, costumers have to pay $24.68 for one bottle of Jack Daniel’s.

With more than $13 of the retail price going to the state in the form of various taxes, the liquor business is highly profitable. In 2009 alone, Virginia earned $248 million from liquor profits, excise and sales taxes. Those dollars can be spent on schools, prisons and mental-health facilities.

In 2009 alone, Virginia earned $248 million from liquor profits, excise and sales taxes.

But Governor McDonnell believes it is not the function of the government to run the liquor business. McDonnell thinks that lower prices would mean higher sales in private shops, including drugstores and supermarkets. He hopes to increase the amount of money gained by the sale of the new liquor licences from around $300 million to $500 million.

Privatization would bring Virginia closer to the policies of neighbouring Maryland and the District of Columbia, where the state collects the taxes but leaves the pricing and the profits to the companies. With this change in the law, McDonnell wants to attract all the Northern Virginians who regularly cross the border to buy liquor elsewhere.

“Maryland and D.C. will likely still have price advantages, but if people are able to buy when they go to a grocery store, if they don’t have to make a separate trip to an ABC store, that will boost sales,” Eric Finkbeiner, a supporter of McDonnell’s plan, told The Washington Post.