Virginia's beer and wine wholesalers are stepping up their critiques of Gov. Bob McDonnell's plan to privatize the state liquor system, saying the plan includes a hefty tax increase that unfairly hits low-income drinkers and that the plan will leave the Virginia budget hurting in future years.
The Virginia Wine Wholesalers Association and the Virginia Beer Wholesalers Association have come out against the plan. But these folks most certainly have a stake in the governor's plan to move to a private liquor distribution system, so they brought in a economics professor to run the numbers and see what McDonnell's plan really looks like when it hits the street.
Associate Professor of Economics emeritus Robert W. Cook is the former chair of the University of Richmond economic department and he said that McDonnell's plan will raise retail prices on booze, hit low-income buyer more heavily and also produce a declining source of revenue.
According to the numbers McDonnell's plan would raise liquor taxes 42.5 percent and that means customers would pay as much as 16.5 percent more at the retail level for liquor. Here's the full slideshow. Download Privatization_Presentation_final_9.28.10
And here's a full county by county mathematical breakdown that shows how the privatization would play out around the state. Download RegressionChart(1)
The basic gist of the numbers is that the new excise tax would fall more heavily on low income counties and low income customers. If you're paying $17.50 a gallon for the cheapest knockoff vodka, is it fair that the guy buying a gallon on Woodford Reserve is paying the same rate - even though the liquor is way more expensive.
Further, the $17.50 excise tax doesn't hold up in the out years, because it'sa flat rate - like the state's 17.5 cent gasoline tax. So as inflation rises and the dollar becomes worth less - the state ends up holding the bag with less money.
McDonnell's team in expected to tweak the plan again this afternoon - so expect to hear some more from the beer and wine folks.