McDonnell Wants You to “Drink Baby, Drink”

Republicans have lousy math skills. Though Malek has a counting resume, it isn’t accounting. So here’s help: to equal the revenue from the ABC stores, every year the state must sell 50,000 liquor licenses or have you and yours purchase 15.5 bottles of booze apiece. No government overhead factored.

This is a nice economics lesson, too, because it tells you a lot about monopolies. Virginians aren’t very familiar with private sales of bottled spirits. A retail liquor license in New York City costs about $4,000. The privatization proponents have no real analysis, but there are estimates of some 800 stores going into the business. Using the high New York figure, that brings in a grand total of $3.2 million. No overhead factored. That means the consumers must bear the remaining $196.8 million. Again, using those contemptible New York figures, with a per gallon liquor tax of $6.44, every swinging Virginian must purchase 3.82 gallons of spirits per year. With the combination of expensive licenses and high taxes, we’re down to 15.3 quart bottles of hard booze per Virginian per year.  

Republicans are showing poor business acumen too. There is this thing called profit. That is the amount that the state is giving away by divesting the monopoly, breaking it up, and allowing the free market to do its thing. Here’s one of its things: squeezing margins through competition. Mom and pop are going to have a hard time covering the $4,000 license fee when they compete with the likes of Wal-Mart which can function at the margin of margins.

But here’s the bottom line: Virginia per capita sales at ABC stores is about a third (4.6 bottles) of that necessary to break even replacing the current annual revenues from the ABC stores with a New York style tax structure. And do you think Governor McDonnell wants New York style taxes? It is impossible to balance two of the constituencies that are pushing him: faith-based groups and alcohol retailers. It is also impossible to balance out the revenues. If this is just a charade to accomplish some “conservative principle,” do it and be done with it. All the discussions are embarrassingly sophomoric.