Tonight we welcome back a regular contributor and someone who I am hoping to add to SUFA as a regular writer once I get my world settled down and can really get focused again. Jon Smith brings us an issue that at first glance might have been too local to be appreciated by everyone. However, after reading through it, and doing a bit of my own research, it is clear that this is a good topic for discussion. While the course of action in the article is clearly a Virginia state issue, the concept of what is being done is something that is being mirrored in many ways on many products in many states. We have all had our discussions here at SUFA around government and the crooked ways that they do thing. Whether you like or don’t like the concept of taxes, I would like to think that we can all agree that transparency is something we are owed as the citizens.
Cloak and Dagger Taxes Again
by John Smith
Here in Virginia, there is a state-run monopoly on the sale of hard liquor. I find this carry-over from the dismally failed era of prohibition to be reprehensible. Not only should government not have a monopoly on things, but they should not be in charge of the sale of consumer goods in general, for a variety of reasons.
The obvious reason is, of course, that it is a manipulation of what should be a free market. Even the calls from the anti-alcohol crowd are nonsensical at this point due to the history of attempts to control vices and, more notably, to the fact that liquor is still being sold. The fact that the state is doing it really does not change much other than that alcohol is only available at certain shops and at state-set pricing. It really comes down to being a set revenue stream for the state. Profits from alcohol go to the state treasury.
Our current governor (Bob McDonnell) is proposing privatizing the ABC (liquor) stores. His primary motivation is because the state needs a large chunk of money and the sale of the ABC businesses would certainly provide that. This is certainly not the right reason to make this change, but, well, if it makes the change happen, then I am all for it. Then I found out a particular detail of McDonnell’s plan, and it has me pretty angry.
Obviously, the sale of the liquor stores, while supplying a chunk of cash, will result in a reduced income stream in the future, an income stream of nearly $250 million per year. There are to be licensing fees and taxes and so forth, so the income will not dry up completely, and it is likely that more stores will open or have liquor added to their current list of items for sale, thus increasing the license income for the state. Still, the total income will drop.
I have no problem with this, as far as I am concerned, the state already gets too much money from its citizens, and it most certainly spends too much. McDonnell, however, in true politician form, wants to have his cake and eat it too. His plan, it turns out, includes a tax of 4% levied on businesses that sell alcohol, not just the liquor stores, but bars and restaraunts as well. This is not acceptable.
Not only does the governor think that we the people are ignorant enough to think that the tax on “businesses” will not affect the prices we pay, but he is trying to tax institutions not involved in the liquor store transaction at all. An increase in taxes will lead to an increase in prices. It does not really matter that the tax was not levied directly on the consumer. If the consumer pays it, then it is a tax on the consumer.
Now, it is entirely possible that consumers will not even notice the change. This is because, it is quite possible that liquor stores will drop their prices once competition is introduced to the market once again. Furthermore, current ABC policy dictates that bars and restaurants pay a premium for liquor, whereas any decent private store would be likely to offer discounts for bulk purchases and larger volume customers. As a result, the prices for the bars will likely go down. This means that, even with an added tax, prices may not go up for the consumer, indeed they could even still end up being lower.
The reason this has me so angry is that it is an attempt to pull the wool over people’s eyes and hide a tax. The state could, if they wished to maintain their income stream, levy the taxes directly on the sales of liquor bottles. While I am no fan of any sort of taxes, and consider the tax of a business to just be a disguised tax, it would still be more above board than the plan McDonnell has.
Why is he doing it? Because if he adds the tax directly to the sale of liquor in bottles, then he is affecting the profit margin of the liquor stores. Liquor stores will not be able to do as much with pricing as they otherwise would, thus making the business less profitable overall, and making competition more difficult. If he monkeys around with the profit margins of the stores, then the potential buyers will not pay as much for the stores and licenses. That means the state’s chunk of up-front money will be smaller. So, he is taxing a different business that is still part of ABC regulations but is not involved in this transaction so that he can keep his income up in the future and still make more up front.
I am sorry, that is not acceptable. I want a transparent government with a clear and simple system of taxation so that people can see what their government is really costing and what they are really up to. These games are tiresome, and they are insulting.
We are not putting up with this junk anymore Governor, we are awake, and we care what is happening. If you cannot do the hard stuff and cut spending rather than play games with our money and manipulate ways to get more money from the consumer, then we will find someone who can. Get the State out of the liquor business and leave us alone. If you find yourself with a budget shortfall, then start cutting state services. We don’t mind, we have been trying to get that to happen for years.
I will add that I feel the same way that Jon does. First and foremost, I am completely opposed to government having a monopoly on anything, especially when it comes to the sale of consumer goods. North Carolina operates under the same system as Virginia. We are only able to purchase hard liquor at state owned ABC stores. This does absolutely nothing to curb the amount of consumption in any way. The only exception to that fact is that you have to find a way to pre-plan to purchase liquor during “state hours” rather than being able to react to a sudden event. If I find that all the sudden ten friends from college are going to be in town, I had better hope that I am able to get to the state store before they close. Because if I don’t, we simply won’t be able to get the liquor that we want. Instead we are forced out to the streets to visit a bar to do our drinking rather than simply having a night at my house. Somehow that doesn’t seem like a wise plan.
More important to me is the fact that the only reason that politicians seem to do anything is because it serves the government’s interest in some way. I long for the days when politicians were doing things because they are the right thing to do. In this example from Jon, the state should be turning liquor sales over to the private market because government has no business monopolizing liquor sales in the first place. They should be doing the right thing based on freedom, liberty, and limited government intrusion in the marketplace. Yet the only way they are willing to do the right thing is if there is a benefit to government. What is funny about this particular situation is that McDonnell is catching it from both sides. Conservatives are opposing the idea because they don’t want liquor sold at all (and therefore only government should sell it?). Liberals are opposing the idea because it is being presented by a Republican Governor.
Government doesn’t have the right to do ANYTHING based on the impact on government in doing so. Government exists to serve the people (hypothetically), and as such, the only reason that government should act is because it benefits the citizens. Government was not meant to prosper on the backs of taxpayers. It was meant to serve the taxpayers and work to ensure that our rights are not violated. It is examples like this, no matter how small, that show us just how far off track government has become.
I sure wish I had the power to organize a full tax boycott. I would love to simply de-fund government by having every citizen simply say, “nope, I am not giving you another dime until you get your spending under control and relinquish the authorities that you shouldn’t have in the first place.” There simply just does not seem to exist the ability to get a significant enough group of people to do so. And without a vast majority taking that stand, those that do will simply be hunted down and imprisoned for refusing to acknowledge government’s right to their money. The up side is that at the current rate, government will bankrupt itself faster than we could organize it. The question around that is simply do we have to turn into the Soviet Union in order to make them understand the foolishness of their plans?
So the real question that I have is, How exactly do we start forcing government to do the right thing because it is the right thing? The federal government obviously doesn’t care one wit about what the citizens think. Short of getting everyone to simply stop paying taxes, how do we make them bend to the will of the people?