Wednesday, October 13, 2010

Grey Goose v. Bowman's Virginia Vodka

As part of his ABC Privatization Plan, Governor McDonnell has proposed a $17.50 per gallon excise tax on alcohol to make up for the existing excise tax and wholesale markup that presently generates over $300 million per year to taxpayers.

When I first heard that proposed tax was done on a per gallon basis, I had to think a minute because we presently tax gasoline on a per gallon basis. Levying the tax as pennies per gallon instead of a percentage of cost is partly why we no longer have the revenue to sustain our road network. Taxing liquids on a per gallon basis requires consumption to increase to sustain revenue increases. However, if you tax liquids as a percentage of price, the natural inflation of prices increases your revenue along with consumption.

At our Town Hall Meeting the other night, Senator Puller pointed out that another side effect of converting our existing excise tax into a per gallon tax is that is have regressive effects.

For example, I hopped on Google and noted that I could by a 1/5th (750ml) of Grey Goose Vodka for $29.00 from a store in California. I can buy a 1/5th (750 ml) of good ol' Virginia Bowman's Vodka (formerly made in Fairfax County, VA (Reston or Sunset Hills for you history junkies like me) for $5.99 in Chester, NJ. For whatever it's worth, they cost $33.90 and $7.20 at the Virginia ABC store.

Under the Governor's proposed exise tax consumers would pay a $3.50 tax on both bottles (750ML = 0.20 Gal. x $17.50 = $3.50). In other words, the tax on Bowman's Vodka would be more than half of the cost of the bottle, but the tax on the Grey Goose would be about 10%.

If the tax were levied as a percentage - say for example 20% - then the Bowman's drinker would pay a tax of $1.20 in taxes and the Grey Goose drinker would pay $5.80 in taxes for the same quantity of alcohol.

One more thing to think about in this ABC privatization debate. You can also read my column with other questions by clicking here.

1 comment:

  1. You seem to be positing that the privatization of alcohol sales is simply a revenue-generating issue. I believe there are several other issues here, not the least of which is that government does not belong in the retail business.

    I believe there are flaws in the governor's plan, but to dismiss it out of hand because it won't pull in enough revenue for the legislature to do what they will, instead of belt-tightening and getting rid of useless programs (can you say "Hemophilia Advisory Panel"?) is disingenuous. Instead, our elected "leaders" threaten to cut schools and firefighting services, so people are willing to pony up dollars.

    That is now how government is supposed to work.

    Work with the governor to privatize sales, developing regulations (since legislators seem to like to regulate everything) and fees that make it a revenue-neutral proposition. Don't just stand around criticizing.