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Gov. McDonnell Makes Changes to VA Liquor Privatization Plan



October 4, 2010

Governor Bob McDonnell has pledged to pull the cork on the state-run sale of alcohol in Virginia, joining the 32 other states nationwide with privatized systems. On September 8th he and his policy staff unveiled liquor privatization recommendations to the Virginia Commission on Government Reform and Restructuring. Since then the plan has undergone some modifications as McDonnell attempts to garnish legislative support. Modifications include the removal of certain taxes and changes in licensing practices.

Firstly, McDonnell’s initial plan called for a $17.50-per-gallon excise tax on distilled spirits, a 1 percent tax on the gross receipts of wholesalers, and a 2.5 percent tax on restaurants that chose to buy liquor from wholesalers. These were put in place to ensure the state would continue to collect revenue close to the $248 million in liquor profits, excise, and sales taxes the state collected in fiscal 2009. However, the new plan calls for eliminating the wholesaler tax and the restaurant fee. The $17.50-per-gallon excise tax will remain.  

Secondly, McDonnell had said that retail licenses should be divided into three categories, with 600 reserved for big stores, 150 for free-standing package stores, and 250 for drug and convenience stores. He now proposes a fourth category, taking 100 of the 250 licenses reserved for drug and convenience stores and earmarking them for very small stores owned by companies that employ no more than 50 people. Also, small stores would be able to finance their bids for licenses over several years.

The governor is trying to gain support from lawmakers concerned about tax hikes and those worried about state revenue decreases. With the proposed removal of certain taxes many lawmakers are now weary about the plan. They claim yearly revenue losses would double if the taxes were removed. Further changes can be expected as debate over the proposal progresses. We will keep you updated on further modifications.


 

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