By
Stephanie Porter-NicholsPublished: September 3, 2010By ROBERT "ROCKY" CAHILL/Columnist
All right, boys and girls, take out your textbooks. It is time for a lesson in economics: how to run a successful business (or not.)
Case in point: Bobby Mack has inherited a successful business from the former owners. He has a sweet arrangement; he not only makes a reasonable profit, he is able to pay his employees well and ,to top it all off, he gets to keep 5 percent as sales tax.
Everyone seemed happy. The employees were happy to have such a good job. The customers were happy because the former owners always managed to keep prices reasonable. They didn't give their goods away but they didn't price gouge either. It was such a good business that many customers drove from surrounding areas to do business there although they passed similar stores along their way to do so.
But then a few folks wanted to be like other business owners. They visited Bobby Mack and told him he would be a lot better off giving his business away to them. Oh, they swore they would take care of him; he'd still get all the sales tax he'd been getting plus a little more since the first thing they would do is raise the price of everything the stores sold. And they would stay open later hours to get even more sales.
What they failed to mention was that while he might get a little more sales tax, he would no longer get the profit from the sales he once had received. Apparently math wasn't Bobby Mack's strong suit.
You may ask, wouldn't the extended hours bring in lots more business? And with maybe a little more advertising, sales could go up and, if sales go up, so would the sales tax collections.
All this is true, however even if sales do go up some, the sales tax doesn't seem likely to be enough to offset the 5 percent Bobby Mack already receives plus the profit his stores make. Even if his stores operate on a smaller profit margin than similar stores, it still would probably be more than the money the extra sales tax would bring in.
Well boys and girls, as I am sure you have already figured out, Bobby Mack is actually Virginia Governor Bob McDonnell and the business is the state's ABC stores. I don't actually see what possible reason McDonnell has for his burning desire to privatize the sale of liquor in the Old Dominion. (Other state efforts to privatize state services have not shown all the great promised improvements.) Some of the large buyers, restaurants and bars for example, want to see private owners so they can get discounts thus making more profit for themselves.
Others want extended store hours and more stores. These claim that many people cannot get to a state store during business hours. They also claim state stores are inconvenient. However, over the past few years, the state has expanded and most areas throughout the state now have stores. And while they don't stay open the hours that a private store likely would, most have extended their hours, staying open much later than a few years ago.
Now I have doubts about this being a good idea for a number of reasons. I really see nothing wrong with the state operating the stores. I also have no problem with private stores. What I do have a problem with is the state or at least its current governor claiming the state will make much more money from sales tax by getting out of the liquor store business.
While I am no great shakes of an economist, I did have a course or two in my college days. Alcohol is a luxury, not a necessity (with the exception of hard core alcoholics who will do anything to get the drink to which they are addicted). The average person will only spend so much of their income on liquor. Sure private stores might be more convenient to shop thanks to expanded numbers and different hours. They may possibly offer new varieties, perhaps reaching new customers; but there are only so many customers in the potential customer pool from which these many stores can draw.
Not only is the number of available Virginia customers a finite number, once the stores increase their prices, they will no longer draw from surrounding states (Tennessee comes to mind in this area). After all, once the price is roughly the same as Tennessee or other neighboring states' stores, why should out-of-state customers drive all the way here, adding the cost of the extra gas and cutting into the amount of funds they can spend on non-essential items such as liquor?
No one has mentioned additional costs to the state, costs such as additional police coverage. After all, once every strip mall, shopping center and crossroads in the state has a small liquor store in place with hours running much later than most state stores, the attraction for alcoholics, junkies (and the seriously poor that are at the point of committing armed robbery to support their families) will be heightened, especially those located in poorer sections or in small darkly lit shops. It will take more officers just to answer the increase in armed robberies, shootings, killings and other crimes against persons.
And, I wouldn't expect some poor clerk working until midnight, making minimum wage with no benefits to go to too much trouble when asking to see a customer's ID showing they are of legal to buy a pint or two. All we need now is more 16-year-old butts in the driver's seat of a tweaked up Toyota, quart of Old Who Hit John between their legs and a foot on the floor with the gas pedal under it, sailing merrily (for a minute or two) on their way to their final destination and maybe taking some friend of mine along with them just because my friend made the mistake of driving home from having to work late or had an occasional late evening out with family.
When challenged on the facts versus the rhetoric, Gov. McDonnell's advisors fallback plan is to play the religious card, "The state shouldn't be in the business of selling alcohol."
I don't believe the state should be in the business of regulating gun sales either but I don't hear the governor calling for dismantling the gun registration system. We probably should not be in the business of killing people, but I haven't heard a hue and cry from the governor to do away with the death penalty, and I stand with him on this one.
While the state would reduce its payroll costs by no longer employing the ABC workers, it has always seemed that when the state or federal government finds a way to save money in one area, it immediately always finds another area to soak up any savings.
All this said. I don't believe in these stressful economic times, the best course of action is to give a lucrative business away to some private business people to operate pretty much as they please. It won't truly improve our economy nor will it be a great improvement in our unemployment rate. It is, at least in my opinion, not a wise move for Virginia.
A freelance journalist, Robert "Rocky" Cahill writes regularly for the News & Messenger. His Possum Philosophy column appears in each Saturday edition.
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