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Posted at 1:15 PM ET, 09/30/2010

McDonnell's ABC plan gets even stranger

By Peter Galuszka

The plan to privatize Virginia's ABC stores keeps getting stranger.

Gov. Robert F. McDonnell is facing criticism that his plan unfairly puts a 2.5 percent optional tax on alcohol sales in bars and restaurants and for ledgers that show that the plan won't raise as much money annually as keeping ABC stores in state hands.

So, the governor is considering making the plan go down a little easier by eliminating the 2.5 percent tax and helping small retailers deal with the cost of buying licenses by offering state financing.

Bids would be at least $102,844 for small retailers and $154,266 for convenience stores. The plan now is to auction 1,000 licenses, with 600 going to big retailers such as Wal-Mart and Costco, 250 for convenience stores and 150 for smaller retailers. Currently, the state ABC operates 332 liquor stores.

To help the little guys, the governor might let them pay for their licenses over a two- to four-year period, in an arrangement that would be much like a state loan.

But that kind of messes up the whole idea of privatization. Advocates, notably Republicans like McDonnell, adhere to dogma that wants to limit government and get it out of the booze business, which brings in more than $200 million a year for the state. The current ABC plan, however, is becoming so unwieldy that the Virginia may end up as a lender, which is so far from the original intent of privatization that it approaches the realm of the absurd.

And the numbers for the plan don't add up, which is a more fundamental flaw. It is still $20 million short of bringing in what state-owned ABC stores do. McDonnell could raise the excise tax on distilled spirits to $22.50 a gallon, from $17.50 a gallon proposed now. But as noteworthy an anti-tax advocate as Grover Norquist, founder of Americans for Tax Reform, has pointed out that the idea is supposed to be to lower taxes, not raise them.

Another problem is that McDonnell says he wants to use the proceeds from selling off ABC stores to fund the Virginia Department of Transportation, which is shy about $20 billion to meet coming road needs. VDOT, however, has already shed thousands of positions under previous, Democratic governors. A recent McDonnell audit of VDOT has found about $1 billion in its budget that had been squirreled away for maintenance.

That, again, raises questions as to why McDonnell's making the state go through this ABC exercise. If VDOT is so drastically short of funds, how does he explain the billion-dollar windfall?

And as McDonnell stumbles from one idea to the other, it is clear who is really calling the plays on this one -- the liquor, beer and wine industry. Virginia Public Access Project files show that the Association of Distributors gave McDonnell $38,600 for his inauguration. The Virginia Beer Wholesalers chucked in $15,000 and the wine lobby put in $10,000. Anheuser-Busch opened its taps by $20,000 for the governor's inaugural soiree.

Peter Galuszka blogs at Bacon's Rebellion. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.

By Peter Galuszka  | September 30, 2010; 1:15 PM ET
Categories:  HotTopic, Local blog network, Va. Politics, Virginia, development, economy, public health, taxes, tourism, transportation  
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It really won't bring in that much revenue, but it will increase the presence of liquor in the daily lives of people.

Virginia's ABC system doesn't have the look and feel of being run by religious ayatollahs, which is good. But putting liquor in every retail location is going to down-scale the Virginia experience for many residents.

Posted by: blasmaic | October 1, 2010 6:40 AM | Report abuse

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