Selling ABC Stores: Raises Taxes on Businesses, Communities ... But "It's not a tax increase"

In keeping with my local focus, I typically don't comment on too many state issues here. However, Governor McDonnell's proposal to increase taxes on alcohol in his effort to privatize state ABC stores is just a bad idea. It's going to raise the cost of doing business for restaurants, bars and anyone who enjoys a drink now and then. This is on top of the already bad idea to even sell the stores.

With two stores in the City (Fairfax Court/Courthouse Plaza), the City has a vested interest in this on the most parochial of levels. On top of this, I understand that Giant and Safeway stores are not included in the Governor's plan. So essentially, the plan could potentially shut down the two stores in the City and not include two chains that have (or have had) a presence in the City and Northern Virginia.

Back to the taxes...In this morning's Post, the Governor is quoted as saying a 2.5 percent tax on restaurants on bars and $17.50 excise tax on a gallon of alcohol is "not a tax increase." Uh? How is that the case?

By the way, DC and Maryland has an excise tax of - get this - $1.50 a gallon. Other states average excise tax is $5. So we would be a high tax state in this case and certainly the cost will be passed along to customers of stores and restaurants. This tax could certainly reduce the number of people drinks have because they won't be able to afford it. The margarita you now enjoy for say $5 could jump to $8 or more based on my back of the napkin calculations for how these taxes trickle down.

The Governor states that the funds he is raising through the tax isn't an increase because the sale of the stores offsets the increases in taxes. The funds raised by the package of taxes is about $260 million that is making up the lost profit and taxes from sales of the stores. The one-time sale of the stores is supposed to generate $458 million for transportation. That still doesn't make sense though, especially in the long-term when the Governor is out of office and businesses have to continue to pay the tax, which inevitablly would increase (remember the axiom that once something is taxed it rarely is ever "untaxed").

Another concern I personally have would be the proliferation of stores. According to the Governor's recommendation, there could more than 1,000 stores selling liquor. I'm not advocating prohibition, but I do believe we have a balanced system in the Commonwealth. People and businesses can get high quality liquour at more than 330 stores across Virginia. This doesn't even include the restaurants and bars that then sell drinks. This is on top of the 6,600 stores that sell beer and wine. Seems to me that's enough spots to indulge.

Look, I appreciate the Governor trying to be innovative and find transportation funds without a general tax increase. But this isn't the way to go. Similar to the VRS "holiday" where the state punted and didn't put in $600 million into the state's retirement system, this proposal will cause more problems later.

So, let's thank everyone for their hard work, shelve the plan and find another way to fund transportation without it being on the backs of small businesses, restaurants, bars, customers and local governments.