Why the tax increases in McDonnell’s plan are tax increases
By | Friday, September 10th, 2010 | Policy

Well, now that the embarrassing correction is out of the way, I can get to the original point: explaining to Brian Schoeneman et al why they are wrong, and that McDonnell’s plan really does involve tax increases.

As an aside, and just to make sure everyone is reminded: I support ABC privatization; the government should not be in the liquor business. I have expressed my opposition to these tax increases because I genuinely believe (1) they will hurt the economy, (2) they’re unnecessary, and (3) they’ll make this harder to come to fruition.

With that in mind, let’s begin.

  1. The loss of ABC store profits can not be called a tax cut: This is probably the largest source of confusion. The Administration is hoping everyone sees the ABC price markup as a tax. It’s not. A markup is what any retailer does to the price they pay a wholesaler (if applicable). While ostensibly it’s supposed to cover retail specific costs and ensure a tidy sum for the owner, the markup can be as high as the market allows. Therefore, the notion of a “marup tax” in this context is inaccurate. The ABC stores are simply setting a profit maximizing price (as they see it). As this revenue is not a tax, its loss by getting the state out of the liquor business is not a tax cut; nor can it be used as reserve against tax increases to claim an overall tax cut or tax shift.
  2. The 2.5% “optional convenience fee”: The more I think about this, the worse it looks. I will freely concede that 2.5% is better than the 5% retail tax that restaurants and others would have to pay if they rejected the “option” and stuck with buying their booze via retail. However, that does not mean this new tax is suddenly not a tax. A fee is a charge the government provides for a service. In this case, since the government is no longer the wholesaler, it is not providing a service at all here. Rather, it is slapping a levy on anyone who takes the wholesale “option.” That is a new tax. The plan would create a new, less expensive way for restaurants and hotels to get booze, but it would then impose a new tax on that method. Sure, 2.5% is better than 5%, but it should be zero.
  3. The wholesale license charge: Brian’s comment about this one (“I don’t know of any business in any state that is allowed to carry on – especially a business like wholesale liquor sales – without some kind of a license”) misses the point. A fee is a simple amount designed to recoup the cost of issuing the particular license. Something that applies a percentage of all receipts is hardly of that category, unless a license for a $1M/year wholesaler costs $5,000 more to process than for a $500K/year wholesaler. Thus, this isn’t a fee, it’s a tax.

All told, the two tax increases combine for a mere $26.5 million in annual revenue. That’s less than 0.1% of the annual budget. In fact, there is enough in the undesignated surplus to cover this gap for two years. Surely, the downside to dropping these taxes and presenting a clean privatization bill is nominal at most.

By contrast, keeping the tax increases could do tremendous economic and (especially) political damage. Raising any taxes in a potential double-dip recession is unwise (and for those who refuse to consider them tax increases, think of what a $26.5M tax cut could do). On the political side, the tax increase gives the Democrats perfect cover to oppose this. I know Brian thinks this irrelevant, but since the Democrats do control the State Senate, they can kill this if they want. If they killed a clean bill, McDonnell and the GOP could remind the voters (including the Tea Party crew) that the Democrats were willing to throw away nearly half a billion in road funds because they’re addicted to taxes. That would make flipping the Senate much easier next year – and that knowledge could convince some vulnerable Dems not to get in the way.

Instead, we’re giving Dick Saslaw and Don McEachin the chance to wrap their caucus in taxpayer-friendly language, which will embolden them to knock this down, make it harder to defeat them in 2011, and potentially sour the Tea-brewers for quite some time.

I’d rather avoid all of that; and I’d hate to think the McDonnell Administration is willing to risk it for a mere $26.5 million.

Cross-posted to RWL


Tags:

Contribute for Conservatism!

Share this post

  • Subscribe to our RSS feed
  • Share this post on Delicious
  • StumbleUpon this post
  • Share this post on Digg
  • Tweet about this post
  • Share this post on Mixx
  • Share this post on Technorati
  • Share this post on Facebook
  • Share this post on NewsVine
  • Share this post on Reddit
  • Share this post on Google
  • Share this post on LinkedIn

About the author

D.J. McGuire

Former candidate for Board of Supervisors in Spotsylvania, current blogger, economics teacher, and long-rumored windbag. There are two causes closest to the heart: steering the country away from the social democratic nonsense that is sinking Europe, and convincing the rest of the "rightosphere" that the NBA really is a joy to watch.

Comments

25 Responses to "Why the tax increases in McDonnell’s plan are tax increases"
  1. Why the tax increases in McDonnell’s plan are tax increases « The right-wing liberal September 10, 2010 23:30 pm

    [...] Cross-posted to BD [...]

  2. VA Blogger September 11, 2010 02:33 am

    This is becoming absurd.

    These are not taxes INCREASES, they are just taxes. One is a much better deal for business than the status quo, the other is a licensing fee that is tremendously common and absolutely not a hinderence to business.

    It’s becoming increasingly clear that you’re simply opposed to all government revenue. And only from such a ridiculous viewpoint could you try to claim with a straight face that dyed-in-the-wool big government liberals are planning to attack this plan for its phantom “tax increases” that strain credulity, and not for the loss of revenue that has been their criticism since day one.

    Where are the other Bearing Drift bloggers on this issue? Why is the only coverage of the centerpiece of this Republican Governor’s policy agenda being provided by a wholly unserious idealist?

  3. Ward Smythe September 11, 2010 09:07 am

    I don’t by any stretch of the imagination speak for the “other Bearing Drift bloggers,” but so far, no one has convinced me that D.J. is wrong.

    Perhaps someone could provide a side by side analysis of the current vs. proposed taxes and fees? If one exists, I’ve not seen it.

  4. Darrell -- Chesapeake September 11, 2010 09:29 am

    It’s not the big government liberals you need to be worried about.

  5. James Hawkins September 11, 2010 09:43 am

    I asked a pharmacy tech about this a couple of days ago. She said that she had heard that Governor McDonnell wanted to sell the ABC stores and raise taxes. Whoops. Great message just before an election.

    Since I do not see thousands of Virginians protesting in the streets and demanding that Virginia get out of the liquor business, perhaps the issue should be discussed in 6 months, a year or two, like not right now.

    I am ready to give Governor McDonnell the “Tim Kaine foot in mouth” award for the wonderful timing on this non-issue.

    If it ain’t broke, don’t fix it.

    I could care less if the state is in the liquor business or not.

    If you want ABC privatization, that is fine with me; but why now in the middle of a recession. Why not do it during the economic recovery.

    And I can not help but wonder if anyone looked at how other states are handling this. Should Virginia use the Maryland or Wyoming system? And why not? Are the systems that the other states use so bad, that Virginia must come up with its own?

    I have a feeling that this non-issue has been handled badly. However I can not walk on water either, so…..

  6. Brian W. Schoeneman September 11, 2010 09:48 am

    Ward, I put up a review of the various takes that D.J. complained of and why they aren’t increases. Where there is new revenue coming in they are brand new taxes – taxes that did not exist before the privatization scheme and which only affect those who want to enter into the distilled spirits business.

    Even the 2.5% vs. 5% tax that D.J. thinks looks worse the more he looks at it isn’t – no one is arguing that retailers are going to end up paying more for their distilled spirits than they do now. That they may pay more in taxes is offset by the fact that they won’t be paying a major markup or delivery fees – and that’s why the Retailers Association supports the privatization plan. Even the license fee, which D.J. wants to call a tax, isn’t a tax increase because it didn’t exist before. And, again, it only applies to those who want to sell distilled spirits.

    What D.J. and the others who are criticizing this plan don’t get is that this plan was never designed to be a tax decrease or to be revenue neutral (in fact, other than the one time payment, tax revenues are projected to decrease by a little over 6% until volume can kick in and fill the gap). It was designed to raise money for our transportation infrastructure and to do so without raising any taxes on working families. So why are people complaining that it raises money when that’s the entire point? We’ve cut millions out of the budget to get to revenue neutral and we need this money now for roads. Where else are we going to get it?

    In the end, under this proposal, the state will get more revenue, but the overall prices everyone pays for hard liquor will go down and there wasn’t a single existing tax that is increased under the proposal.

    A new tax does not equal a tax increase. You can’t increase something that doesn’t exist. And when the new tax, coupled with privatization, will result in a lower price for retailers, how can anyone call it an increase?

    It doesn’t make any sense. I just don’t get why anyone on our side of the aisle is criticizing this plan as a tax increase. It isn’t. And the only alternatives anyone on the other side of the aisle is discussing is a gas tax and that sure as Sunday IS a tax increase. Why are you guys complaining when the alternatives are far, far worse?

  7. Brian W. Schoeneman September 11, 2010 09:52 am

    James, we need the money now. That’s the point. We can’t afford to delay any longer on the infrastructure spending. The sooner we get this money, the sooner we can plow it into transportation and get a start on fixing our failing system.

    The fact that your pharmacist thinks we’re selling the ABC stores and raising taxes is because of poor reporting by the Washington Post that was eagerly picked up and repeated by a variety of people, including D.J. before the actual proposal was released. That’s not the Governor’s fault.

  8. VA Blogger September 11, 2010 09:54 am

    The two taxes D.J. has a problem with are:

    1) Charging a 2.5% optional convenience fee for bars and restaurants to purchase liquor from a wholesaler. Right now, bars travel to ABC stores and buy liquor at the marked-up shelf price. They can continue to do this under McDonnell’s plan if they so choose. Alternatively, they can pay a 2.5% fee to purchase at lower rates and get their purchases delivered to the store.

    This fee is a new creation, so its difficult to compare it to the status quo. My best comparison looks at the impact on businesses. Almost all businesses will choose to go with the new route. They get to make purchases at lower prices, and they get the convenience of delivery. That’s a much better deal than paying marked-up prices and arranging for transportation on their own. So McDonnell’s proposal is one that benefits bars and restaurants.

    D.J.’s claim is that the fee should be 0%, because…. well, he doesn’t really have a particular reason except for a blanket objection to government revenue. McDonnell’s proposal helps close the gap on what the state would be missing out every year from ABC profits, which makes the plan more politically viable since the overwhelming opposition is based on cutting general fund revenue.

    In fact, it wouldn’t even begin to make sense for Democrats (or anyone else) to try to attack this as “raising taxes in a recession”, since the fees are entirely optional, and do better for business’s bottom line than the status quo.

    The simple fact is that businesses pay less (the convenience fee is less than the mark-up on bottles at the ABC store); you have to be near delusional to call this a “tax increase”.

    2) The 1% licensing fee for new liquor wholesalers. Again, this fee is a new creation so its difficult to compare it to the status quo. The reason why it’s a new creation is because there are currently no liquor wholesalers in the state of Virginia, since everything is government controlled. However, virtually everything licensed in Virginia has a cost associated with it. Exempting liquor wholesalers for no particular reason would be a massive shift away from the ordinary.

    D.J.’s objection is, again, that the fee should not exist, though he doesn’t provide a good reason why other than objection to the government generating revenue. His argument is that the cost of government to process a license costs less than what the 1% fee would generate, therefore its too high. However, the fees don’t just go to processing licenses, it also goes to enforcing the addition of 1,000 ABC liquor licenses being auctioned off throughout the state.

    The impact on businesses is relatively simple to gauge. The status quo right now is non-existent; those who would engage in liquor wholesaling are shut out from the state of Virginia. The proposal is a new business opportunity, which undoubtedly many will jump at the chance to partake in, which means that the fee isn’t hindering any business. And liquor will be cheaper for stores to buy regardless, so there’s no impact on the consumer either.

    So for a quick summary:

    OLD: Bars and restaurants travel to ABC stores and buy liquor at marked-up prices.
    NEW: Bars and restaurants pay a 2.5% fee to get liquor for cheaper and delivered. Better for businesses, better for consumers. And the fee is entirely optional.

    OLD: Liquor wholesalers are shut out from the state of Virginia.
    NEW: Liquor wholesalers can operate in the state of Virginia with a 1% licensing fee. Liquor reaches stores, bars, and restaurants at a cheaper cost. Better for wholesalers, better for businesses, better for consumers.

    These are what D.J. is calling “tax increases”, despite that businesses come out ahead on both fronts. His only stated objection: that government is generating revenue (to make up for lost ABC profits), and he believes it shouldn’t be, and that somehow, that will make the plan for politically appealing for Democrats.

  9. VA Blogger September 11, 2010 09:56 am

    And the tax increases that Democrats like Don McEachin were blasting was the 4.5% tax on bars and restaurants that was scrapped from the final proposal, but spread around by the Washington Post. So by arguing that Democrats will oppose the proposal for phantom tax increases and therefore McDonnell is a bum, D.J. is echoing Washington Post talking points.

    Well done.

  10. Brian W. Schoeneman September 11, 2010 09:56 am

    For some reason none of my comments are showing up.

  11. Ward Smythe September 11, 2010 14:09 pm

    First, thank you for the explanation. But by saying that D.J. calls the Governor “a bum” you’re doing exactly what you’re accusing D.J. of doing. D.J. has said repeatedly that he’s in favor of the privatization. So, don’t be making things up.

    But back to the issue, is it not true that, regardless of what you call them the 2.5% fee and the 1% licensing fee are new sources of revenue? They have not previously existed in another form?

    If that’s the case, then D.J. is still right.

    Regardless of the need or justification for them…fees=taxes.

    That’s not to say that in the long run the proposed system would not be better. Perhaps it would.

    But don’t say it doesn’t raise taxes.

  12. VA Blogger September 11, 2010 16:04 pm

    It is wholly irresponsible and dishonest to call these “tax increases”, because any reasonable person hears that and assumes it means that they or someone else will have to pay more. That is completely inaccurate, and the only way you can reach that conclusion is if you willfully ignore facts.

    You call it a “tax increase”, even though it is not. A tax increase is where an existing tax goes up. Neither of the two taxes in question previously existed. Therefore, their creation is not a “tax increase”.

    If you are contending that the very act of their creation constitutes a tax increase, then you absolutely MUST consider what they are replacing.

    I’ll give you an easy-to-follow example. Say Virginia taxed the sale of every pack of Reece’s Peanut Butter Cups at 5%. Say then they eliminated that tax, and created a new tax of every individual Reece’s Peanut Butter Cup at 5%. The revenue generated would be the same; the cost to the consumer would be the same. According to the logic of you and D.J., this would equal a tax increase because they created a new tax on individual peanut butter cups

    The ONLY way you can reach that conclusion is by ignoring the other revenue that the state was generating and people were paying that no longer exists.

    In this case, the state is generating LESS revenue. Consumers are paying LESS. Businesses are paying LESS. If you’re simply looking at the creation of a fee, you HAVE to look at what was eliminated as well.

    In the case of the 2.5% optional fee, you HAVE to look at the fact that, right now, bars and restaurants MUST buy their alcohol from an ABC store and pay the marked-up shelf price. Where does that mark-up go? Into the profits of the ABC, which goes into the state’s general fund.

    DESPITE THE FACT that the 2.5% fee is a new fee, business are ultimately paying LESS to the government because they are no longer paying that marked-up price. One source of government revenue was created; another was eliminated.

    What’s incredibly frustrating about your inability to accept this fact is that the state is if you look at all the facts and apply your logic, then this HAS to be considered a tax decrease, not an increase. The only way to reach your conclusion using your logic is by ignoring all the facts. That’s why you’re being dishonest.

  13. D.J. McGuire September 11, 2010 22:26 pm

    How ironic, VAB. In your attempt to show that I am inflexible, you reveal your own rigidity, and because of that, you stumble into intellectual disahonesty while trying to claim I am dishonest.

    In effect, you are assuming that the only choices are the status quo and the current McDonnell plan. That is a false choice that I reject. McDonnell himself changed the plan right before he released it (junking one of the new taxes that the WaPo listed in its Wednesday report); in fact, he’s shown more flexibility that you have!

    In fact, the “convenience option” and the tax imposed on it are two separate issues. I am thrilled about the option, but I oppose the tax slapped on it. Ditto the wholesaler tax issue: I heartily approve at letting private wholesalers into the market, but I can not support slapping a 1% tax on their gross receipts. These are tax increases, and I will not be strait-jacketed into accepting them as part of the larger picture. They are blemishes to the picture, and they have to go.

    Furthermore, as I have repeatedly made clear, ABC store profits are revenue to the state, but they are not taxes. This highlights the difference between finance and economics. The former focuses on “the bottom line” – as you have. The latter looks at how policy affects consumer and firm behavior, too.

    A similar dissonance between the financiers and the economists popped up during the TARP fiasco, but that’s an entirely different matter.

    Yes, overall, the new plan would be better than the status quo – if it were to pass. However, I believe (1) that the plan can be made better still without the new taxes, (2) the new taxes will make it harder to pass in this legislature, and (3) should it not pass, said taxes will also damage the GOP in the 2011 elections, thus making it even less likely to pass in the following legislature.

    This is why I believe the new taxes must be taken out. I dthink privatization (which we both want) is far less likely to happen if they remain, and I do think it would benefit the Commonwealth more if they were scrapped.

    Meanwhile, bringing this closer to your familiarity, the difference between our positions in dollar terms is $26.5M annually. McDonnell could patch that gap for the next two years with funds from the undesignated surplus.

    I certainly hope the Governor won’t “go to the mattresses” over $26.5 million.

  14. VA Blogger September 12, 2010 11:03 am

    Here’s where you run into trouble, D.J.:

    “These are tax increases…”

    This is a lie. You are lying when you say this. As I pointed out above, and as you evidently ignored, a tax increase is when an existing tax rate goes up. The 2.5% convenience fee doesn’t exist in any form right now because wholesalers don’t exist in any form right now.

    If you stubbornly insist on calling any creation of a tax or fee a tax increase, then you have to look at what they were paying before that’s eliminated.

    The only way to make your backwards logic work is to claim that the money bars and restaurants used to pay to ABC stores weren’t taxes. You’re technically correct. From a business prospective, they are a fee that they pay money which goes to the government for the convenient option of selling liquor in their stores. Maybe we should refer to it as an “optional convenience fee”.

    But you say, “The latter looks at how policy affects consumer and firm behavior, too.” Okay, let’s look at consumer and firm behavior then. Business will be paying less for liquor by going through a wholesaler, even with the 2.5% fee. You even admitted yourself that it provides a good deal for businesses. Firms will undoubtedly sign up for it, because liquor will be cheaper, which means they can sell it to consumers for cheaper. So the move to privatize, even with the option 2.5% fee, encourages business growth and consumer purchases, because the amount of money people and businesses pay to government decrease under this proposal.

    That’s exactly what happens when you decrease taxes. As I said above, the ONLY way you can use your logic to conclude that these are tax increases is to ignore all the facts, namely what businesses and consumers were paying before that is proposed to be eliminated. You are cherry-picking data points in order to smear the Governor as a tax-hiker. All you need now are a few misspellings and you can get a job with the Washington Post.

    If the Governor decides to be flexible, as you call it, and eliminate these sources of revenue from his proposal, I’ll still support the plan, obviously. However, there is no legitimate reason not to support it as is. And your highly idealized vision, where government doesn’t collect any money and roads and schools are paid for with pixie dust, isn’t politically viable.

    So let’s look at your points: 1) The plan is fine as is, no need to have the perfect be the enemy of the very good, 2) Once people put on their thinking caps and look at the entire proposal, they’ll realize that these new taxes constitute a decrease, and the plan will gain support from the right, 3) the only way that the taxes will be politically damaging in the 2011 elections is if media sources and bloggers on either side of the aisle continue to lie by calling them “tax hikes”. But education is as much a political strategy as anything else, and I trust the Governor’s messaging team to explain the truth to stubborn fools far easier than I can.

    So assuming the Republican caucus doesn’t make the same mistakes you did and actually look at the whole proposal, they should be on board. The only opposition will come from Democrats. As Brian points out, they want to raise the gas tax. Even without it, they are interested in raising *any* taxes to pay for stuff. The last thing they’re going to do is take a hardline anti-government-revenue position like you are.

  15. James Hawkins September 12, 2010 12:30 pm

    Thank you VA Blogger for explaining things so that even someone like me can understand.

    I would still favor doing this in a recovery or boom time since the state would make more money then in a recession.

  16. Darrell -- Chesapeake September 12, 2010 14:36 pm

    I wonder what the local governments will do to get their piece of the pie? Maybe the only place you will be able to buy retail alcohol will be down by the tattoo parlors and adult book stores.

  17. D.J. McGuire September 12, 2010 16:34 pm

    VAB,

    You yourself revealed the flaw in your own argument: “you have to look at what they were paying before that’s eliminated.”

    The wholesale option itself eliminated the retail sales tax; the 2.5% tax did not. Thus, the tax goes from zero to 2.5% – an increase.

    You can say the combination (option and tax increase) is an improvement over the status quo – and I think you’d be right. But I still say the option *without* a tax increase is better still, for all the reasons I have mentioned in what are now several posts and comments.

  18. Britt Howard September 12, 2010 19:57 pm

    Some would argue that beating your wife once a day is better than beating her three times a day. So, because your wife is only beat a third of the usual amount, that makes the decreased levels of brutality acceptable?

    Granted taking the point to the extreme, but that point has merit. You could argue that, at times we must accept incremental progress rather than have none at all. Which brings up the “pixie dust” arguement that really makes DJ’s point for him. Why? The taxes in question only raise $26.5 million. That plus “pixie dust” won’t do much of anything in Hampton Roads, let alone the whole state. So, DJ wins that point, because there is not legitimate compensation for doing “the wrong thing – but less”.

    I will accept the notion that the gains to business must be considered as an economic asset is transformed from a captive service(in effect still a tax) to to a cheaper more market driven dynamic with captive taxation after, that is less costly to the business. That doesn’t make it right, but I must concede better.

    The most worrisome part to me personally is the new tax (increase)for wholesalers. True, that in our infinite wisdom, we are finally allowing wholesalers into the Commonwealth. Kinda like extortion for no longer doing harm. I think there is too much licensing going on to begin with, but if we accept the idea of charging new wholesoalers a license tax, a 1% tax? A percentage? Like sales tax? Like BPOL? A flat fee isn’t good enough? As always, the government wants it’s cut don’t they? I miss watching the Sopranos, btw.

    The market approach opens up a new “sin tax” dynamic that could ally the Big Government crowd with the Right Wing social conservatives. Status quo puts a barrier to taxes that drive out booze. If you own the business and tax yourself, well not much harm done unless you pass it to the consumer and drive demand to other states or illegal distilling. Under a new market approach, we could see future tax increases added to the newly created baseline. The justification will be the “windfall” private enterprise enjoyed as “Big Alcohol” was allowed to participate in a market previously denied them. Plus your public safety and moral objections that will be piled on. It would be a way for “sin taxers” to “Phillip Morris” the booze trade to extinction since they would no longer be slaying the golden goose that they owned on a state level.

    All those objections aside, states that took this route like West Va. and Iowa ended up with more revenue according to Reason.TV. Revenue from licensing in addition to ending employee related liabilities(pay/retirement etc.)was a big part of it. It may be the price we have to pay to move incrementally in the correct direction of Freedom and natural markets.

    These taxes, new/increased or not, don’t change my mind on supporting this. Does it curb my enthusiasm for it? Do I suspect that something is fishy with anticipated revenue? Yes. In fact, although it will be hidden with rhetoric and creative accounting, I believe that the cost savings and new revenue streams will surpass $246 million talked about. Especially as the wholesale end developes and the retail end transforms.

    Still, I have to support even this flawed movement in the correct direction. I must at least applaud the effort. If I am to look to figuratively hang the Governor over tax increases, I don’t think this quite makes a compelling case. A proposed gas tax? Well, that might be different!

  19. Britt Howard September 12, 2010 20:11 pm

    My apologies for obvious typo on the “$246 million” at the end there. Not sure where that came from. I meant that to be $26.5 million as taken from the article.

  20. VA Blogger September 13, 2010 00:35 am

    D.J., you’re again cherry-picking facts. At no point is the option to buy from wholesalers charged at 0%. At no point is the option to get a license to wholesale liquor at 0%. Therefore, it cannot be considered a tax increase. You can ONLY argue its a tax increase if you’re arguing that the creation of those fees is an increase, but as you’ve conceded, businesses will be paying LESS.

    There’s no more argument here; you’re just trying to spin because you don’t want to admit that you’re flat-out wrong. You are lying when you say this is a “tax increase”, and you are lying when you call McDonnell a “tax hiker”.

    Your only remaining point is that the 2.5% fee *could* be 0%.

    Fine. You can continue to make blog post after blog post about how McDonnell isn’t slashing government revenue as much as you’d like. I won’t stop you on that front. I think your idea makes the plan much less politically viable, but hey, why not splash governance with a little bit of unrealistic idealism every once in a while. But it ain’t a tax increase.

  21. Mike O' September 13, 2010 20:55 pm

    Britt,
    If the argument is that the VA should not exercise it’s authority under the 21st amendment in the current fashion you may have a point; if your argument is that you can change the system and add layers of profit for wholesalers and retailers (which the taxpayer now receives) and not harm the consumer then you need to rethink.

    The transformation at “retail” will be a continued movement which puts small businessmen out of business, the lack of ability for the “average retailer” to pay the exorbitant cost of a license due to the limit on licenses is unfair and anti business.

    If the goal is to do away with the system and be fair to businesses, there should be no limit on licenses, let the market work for “all” and not just the large politically connected “few”. Just because “Joe’s corner store” does not get invited to give his input like “Walmart” does not mean he deserves less of an opportunity to do business in VA.

    VA blogger,
    Spin this thing in circles, but the prices that Virginian’s pay will “increase”. Call it a “tax” or “profit” for retailers and wholesalers, I don’t think it makes much difference at the cash register.

  22. VA Blogger September 14, 2010 10:06 am

    Mikey, on what basis are you claiming that the price of liquor will increase?

  23. steve vaughan September 14, 2010 11:50 am

    VAB: “At no point is the option to buy from wholesalers charged at 0%.”
    Actually, it is. Currently bars pay no sales tax on alcohol they buy for resale.
    Of course they don’t get wholesale price now either. They pay the same price per bottle that you and I do-minus the sales tax.
    And they dont’ get delivery. And they don’t even have the choice of which ABC store to patronize, their store is assigned.
    But going from 0% tax to either 2.5% or 5% IS a tax increase. Or to make Brian happy, it’s a new tax. I’m not sure why there’s any difference between the two. I think if someone applies a tax to someone who wasn’t paying one before it’s accurate to say they “raised taxes.”

  24. Mike O' September 14, 2010 17:48 pm

    VA blogger,

    Any student who has taken even one course in business will tell you that for a business to survive the first rule is to make profit.
    In the current system the “profit” goes to the state. The governor has said that the state will maintain the same profit even after we add a layer of profit for wholesale and retail. The only way for this to be true is 1. We sell a whole bunch more liquor or 2. The prices increase to the consumer.
    Unless you believe the wholesalers and retailers are going to invest millions to get licenses and expect a negative return. (that would defy the first rule of business)

  25. This changes everything | Bearing Drift: Virginia Politics On Demand September 30, 2010 15:28 pm

    [...] the plan were smaller than I thought, but they hadn’t disappeared. In particular, there were two new taxes that I felt were unwarranted – the 2.5% “optional convenience fee” and the 1% wholesale receipts tax [...]

Leave your response

The comments section is for meaningful discussion. Readers are reminded to post comments that are germane to the article and write in a common language that steers clear of personal attacks and/or vulgarities.

Please take a moment to review our comment policy.