Note from Dan: After decades of twiddling its thumbs over transportation funding, Gov. Bob McDonnell and the Virginia General Assembly enacted a very flawed but necessary transportation funding scheme this year. It increases the general sales tax and bunch of other taxes and fees on fuel and vehicles. It does away with the per-gallon tax but replaces it will new wholesale taxes. Instead they should have increased the per-gallon tax and indexed it. Here’s the last big scheme Gob. Bob put forth, from a column that originally ran Sept. 9, 2010.
Gov. Bob McDonnell was unequivocal in his January State of the Commonwealth speech:
“We will not turn our economy around by taxing Virginians more. … Therefore, if you pass a bill in this recession that raises taxes on the hardworking families of Virginia, I will veto it. And if you pass a budget embedded with those same tax increases, I will not approve it.”
Now McDonnell seems to have changed his tune when it comes to privatizing Virginia’s state-controlled liquor industry.
Although his administration took pains to deny it at an announcement Wednesday, the various levies McDonnell is proposing as part of his complex privatization plan look, sound and act like new taxes.
There’s a 2.5 percent “fee” the state will collect on liquor delivered by private wholesalers to private bars and restaurants. This would be new.
And a 1 percent gross receipts tax levied on liquor wholesalers. That would be new, too.
And a $17.50 per gallon liquor excise tax at the wholesale level. This would replace existing taxes and profits the state now makes selling booze.
McDonnell would also auction off 1,000 liquor store licenses and sell some state property at prices his administration projects would produce a $500 million one-time windfall. Most of the licenses would go to supermarkets and big discount retailers such as Walmart.
If there’s anything good about this scheme, it’s this: Finally the “no-new-taxes” crowd has confronted the fiscal reality that you can’t get something for nothing.
The McDonnell administration argues these taxes will be invisible to consumers. For example, restaurants will save more than 2.5 percent buying liquor at wholesale prices rather than the retail prices they pay now.
But Roanoke barkeeps seem reluctant to swallow that.
They like the idea of liquor wholesalers delivering booze to their establishments, because they have to go to state liquor stores and pay retail now.
As for the wholesale delivery fee, “I would not be in favor of that, just like the 2 percent meals tax” increase, said Roger Lamm, owner of W.R. Brews on Williamson Road. The 2.5 percent liquor tax “would hurt us more, because we eat that tax. You pay $4 for a drink, and we pull the tax out of that. Or we’d have to go up.”
Mike Flanary, a partner in The Cornerstone Bar and Grill and Flanary’s Irish Pub, wondered aloud: When is it going to end?
Last December, state law required Flanary to ban indoor smoking at The Cornerstone.
On July 1, the state removed its longtime ban on carrying concealed handguns in bars and restaurants. That left Flanary with the choice of allowing concealed handguns in each bar, or posting signs next to the doors banning them.
On the same date, the city of Roanoke raised the meals tax to 7 percent, from 5 percent.
“It just puts more of a burden on an industry that’s known to struggle in the first place,” Flanary said. “How much more can you heap on an industry that’s already struggling? It’ll make me raise prices.”
Finally, let us not forget the biggest single line of reasoning put forth by McDonnell for privatizing liquor sales.
It was a something-for-nothing idea to help finance road construction in Virginia without raising taxes.
You’ve got to admit it’s pretty weird to pave roads with money raised from booze.
Now that new taxes have also entered the equation, is there any reason to keep up the pretense that this is the best transportation-funding solution?
The one-time (estimated) $500 million injected into the state’s road-building coffers will do little to ease the sting from billions in cuts imposed on the Virginia Department of Transportation just in the last two years.
At best, it’s a temporary, puny and unnecessarily complicated “fix” to a problem that already is huge and is destined to grow bigger each year.
Virginia last increased its gasoline tax in 1987.
The gas tax is simple and operates like a user fee.
The state should raise that one to pay for roads instead.