Friday, September 18, 2009

Granite State's Liquor Strategy: “Live Tax-Free or Die"

According to the "Wall Street Journal", the state of New Hampshire made a profit of $122 million from liquor sales in FY 2009.  New Hampshire is one of those few remaining states that still sell liquor at “state stores.”  So how did the government of the fourth-smallest state manage to make such a profit?

The answer is simple.  New Hampshire does not impose a liquor tax.

As strange as this may seem to the political class, New Hampshire actually makes more money selling tax-free liquor than it could ever hope to make by taxing the demon spirits like West Virginia and other states do.  West Virginia was mentioned in the article, however.  An accompanying graphic listed our liquor tax rate of $1.85 per gallon as the highest state tax rate.

New Hampshire is a magnet for liquor sales in the northeast.  Bostonians, those quaint New Englanders who cannot tax themselves enough, take I-95 north when it’s time to re-stock the bar.  It seems that a Massachusetts legislator who recently voted for a liquor tax increase (to close the budget deficit, of course) was caught on film shopping for booze in his neighboring state.

And why not?  New Hampshire booze is priced to sell.

All of my life, West Virginia has kidded itself when it came to taxing booze.  One of the first lessons I learned about economics took place in 1955 inside a Virginia liquor store.  I was just six years old.  My father bought five ‘fifths’ of Old Taylor bourbon and told me, “Boy.  In West Virginia, the same money buys four ‘fifths.’”  I wasn’t good with fractions at the time, but I realized immediately how much twenty percent was.

I cannot begin to count the number of wedding receptions that I have attended in West Virginia but drank out-of-state liquor.  At one time, Washington, D. C. was the booze magnet for north central West Virginia.  Then LaVale, Md.  Fathers of the brides keep track of these things.

According to New Hampshire officials, about half of their liquor sales are to out-of-state customers.  You know they love it when the faithful liberals in Vermont, Massachusetts and Maine vote to raise liquor taxes.

West Virginia has missed a great opportunity over the last fifty years.  If the state had operated just one tax-free liquor store in Jefferson County, I am willing to bet that one store would sell more liquor than the other fifty four counties combined.  Or if that one tax-free store was in Wheeling, the same could probably be said.

That never happened because the mentality of West Virginia politicians has always been: When in doubt, raise taxes.

There is a subtle point made in the article that bears discussing.  As I mentioned, West Virginia is listed as having the highest liquor tax rate. 

The people who make decisions on where to locate business operations most likely share two things in common—they read the "Wall Street Journal", and they drink alcohol.  When they read that we have the highest liquor tax, they will draw two conclusions.  First, this is just one more category where West Virginia ranks worst.  And, second, those lunchtime martinis will be served with sour olives.

New Hampshire neither levies an income tax on wages, nor does it charge a consumer sales tax.  Don’t tell our politicians this.  If you do, it will cause a collective brain freeze. 

You can’t balance a state budget without taxing everything—everyone knows that!