Archive for the ‘Economics’ Category

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 governer 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, of 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.

It is here, the new kind of control Ayn Rand warned us about. I have seen this coming for a while, and I guess it has, in fact, been in place for some time, but it is growing. One of the indicators to me is when persons who are not politically minded notice trends like this. I am talking about the “aristocracy of pull”, a societal state where laws are so restrictive that it is impossible to be in full compliance, thus you are subject to enforcement unless you know the right people.

I was recently a bystander in a discussion at a local club where there was a conflict between the club and the owner of a nearby restaurant. Some of the issue was competition, some of it was the culture clash of different clientele. Certainly there were things both parties could do better, and there would be many ways in which they could work out their relationship and both be successful. Read the rest of this entry »

In yet another obvious breach of anything that could be considered “transparency”, Congress proceeded to push the health care bill/debate forward. The Republicans, at least, voted unanimously against moving forward on a debate and eventual vote, while the Democrats and Independents all voted to proceed. We have been repeatedly assured that the bill would die in the Senate, allaying fears after its surprising pass in the House, but such assurances seem more and more shaky. Read the rest of this entry »

Conventional wisdom would indicate that a minimum wage increase would help those who make very little, those who work jobs that pay minimum wage. Unfortunately, conventional wisdom does not look closely or deeply enough. The implementation of a wage minimum has an artificial effect on the cost of labor. The idea, of course, is to make sure that workers are not being taken advantage of by employers, and finding themselves working long hours but still making too little to live. The problem is, if employers cannot afford labor, they will either replace labor with technology, or do without the functions that labor would have provided in order to stay in business. It is either that, or they go out of business. Either way, the lower skilled jobs are cut out entirely, meaning that the people who depended on those jobs for some type of income find that they have no income at all. Read the rest of this entry »

The Obama Administration seems to havebacked off on their reactionary attitude slightly. Its not much, but at least its something. The first stimulus was devastating to our dollar value and debt, a second would have been a disaster.

Obama always has been quick to change his mind. I think he may have seen the evidence int eh world summit that continued spending has not fixed Europe. If only he would see the same thing about Cap and Trade. The environmental aspects of the summit were still jsut as ridiculous as always, although they at least made it more talk than reality, agreeing to drop emmissions by 80% over the next 40 years but not lining out any forced methods for doing so. Read the rest of this entry »