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A new plan for liquor

January 28, 1999

Some members of the West Virginia legislature are upset over Gov. Cecil Underwood's latest budget proposal, because balancing it would force them to rebid the state's liquor licenses when they expire in 2000 and pass a 25 percent tax on smokeless tobacco. These are difficult decisions to be sure, but making them is what legislators were elected to do.

When West Virginia left the retail liquor business in 1990, it decided to sell 214 licenses that would be good for 10 years to the highest bidders. Now that those businesses are established, the owners fear that they'll be outbid for renewal licenses by large corporations with deep pockets.

But if the legislature protects existing license-holders, either by extending the terms of their licenses, or by giving them cut-rate deals, it will be tough to raise the $19 million needed to balance the budget.

The smokeless tobacco tax, projected to raise $7.1 million a year, is an easier call. There've been some horrible examples of what this substance can do to the inside of a user's mouth, so anything the state can do to discourage its use should be welcome.

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As for the liquor licenses, raising an estimated $20 million by selling 200-some liquor licenses would put each license in the $100,000 range, beyond the reach of most small businesspeople. And even corporations with lots of cash might balk at paying that amount for a license in a low-traffic rural area.

Instead of that, why not price the licenses more reasonably and have the state take a percentage of the profits in addition? It might not yield $19 million in the first year, but unlike Underwood's proposal, it would do several things. It would eliminate the poor-mouth argument from retailers who feared being priced out of the business and would produce a continuing revenue stream, instead of a big infusion of cash every 10 years.

Finally, it would prevent the liquor business from being infiltrated by corporations which would be under pressure to increase sales to pay for a high-priced license, an outcome no one may have anticipated, but one which is surely possible.

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