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Privatization: McDonnell’s Hangover?

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Jeff Shapiro of the Times-Dispatch is reporting what just about everyone is concluding: Barring some sort of GOPer miracle, Bob McDonnell's linchpin to his bogus "transportation plan," selling off the ABC crown jewels, is DOA in the General Assembly. Or, as Shapiro puts it, "He may have four days, possibly eight, to infuse life into an idea that, for many of his fellow Republicans, is as dead - and delusion-inducing - as the worm in a bottle of tequila."

Evidently, even McDonnell's own Republicans aren't buying a plan that would hit the already comatose General Fund with another $21 million (or worse) revenue cut. If McDonnell closes that revenue gap with an even higher wholesale tax than previously proposed, he will be angering the very guys that were among his biggest donors in 2009, from whom he garnered more than $350,000 according to VPAP.

Roanoke Times columnist Dan Casey tried his hand at some of the wholesale "arithmetic" in McDonnell's "plan" today. To illustrate, Casey used the ABC stores' best seller, Aristocrat Vodka. Right now, a fifth of Aristocrat costs $6.75 at retail. By Casey's calculations, under the Rube-Goldberg-like McDonnell "privatization" plan with all its "fees" and add-ons, that same fifth would cost about $10.00. So much for privatization bringing lower costs to the consumer.

Multiple studies over the years have shown that going from a state-owned system for alcohol sales to privatization results in increased prices for the consumer and lower revenue for the governmental entity. Why should Virginia be different? It's simple math. When producer, wholesaler, and retailer each add on a healthy profit margin to a product, it will cost more. If the government doesn't recoup the profit it made by increasing taxes a like amount, it will have less revenue.