McAuliffe’s proposed alcohol tax increase could wash up local businesses

Janeal Downs
Staff Writer

Virginia college students may be even harder-pressed for spare change if the Virginia General Assembly passes Gov. Terry McAuliffe’s plan to implement a higher alcohol tax this session.

The last alcohol tax increase was a 4 percent hike that occurred seven years ago in February 2008, said Virginia Department of Alcoholic Beverage Control spokeswoman Kathleen Shaw.

The Virginia Department of Alcoholic Beverage Control is currently determining implementation details from McAuliffe’s distilled spirits mark-up, according to Shaw.

“As part of that process, ABC has sought comment from its stakeholders, including vendors, suppliers and industry representatives, and is working with them to accommodate their business needs,” Shaw stated.

As of now, ABC’s executive leadership team has not made a final decision on the proposed increase and its potential effective date but Shaw said this will be done in the next few weeks.

VCU history professor James Watkinson said many stakeholders in the alcohol industry object heavily to the tax because it is regressive, meaning it largely affects the people who can afford it the least.

“If you are going to go out to drink, expect to have a bigger hit to your wallet,” Watkinson said.

If the tax is passed, Watkinson said bars will have to raise their prices. This means restaurants, which are required to have at least 30 percent of their sales from food, may need to sell more food to compensate.

He said alcohol industry lobbyists have already sent letters to the General Assembly and the Virginia ABC Board asking them not to raise the tax because they don’t want sales to be adversely affected.

Matthew Simmons is the president of Capital Ale House, which owns five restaurants in Virginia and employs more than 300 people. He said his establishments are Virginia ABC licensees and serve wine, beer and mixed drinks.

“Our drink prices are definitely going to have to increase and I’m sure other ABC licensees are going to have to do the same,” he said.

Simmons is also vice president of the Virginia Restaurant Association and works with the Virginia Hospitality and Healthcare Association.

“We’re very active with the politics of this matter and it is something we’ll be addressing in next year’s General Assembly,” Simmons said.

Simmons said these groups will speak with state delegates, and every year they communicate the issues that affect their industry.

“Many people don’t realize this, but restaurants and places that sell alcohol in other states usually pay a wholesale price, they don’t pay a retail price,” Simmons said. “In Virginia, restaurants and anyone that sells alcohol pay the same prices as any other person walking into a liquor store.”

Simmons said industry advocates would like the ABC Board to look at wholesale pricing for licensees because restaurant profit margins are slim. He said any price increase on liquor will be harmful to the industry as a whole.