A couple days ago, the Governor announced that our recent budget shortfall would be covered (in part) by an increase in taxes on ABC products. But how did we get an ABC? And why does the state regulate alcohol sales?
The history begins many hundred years ago and thousands of miles away …
In the late 17th century, the English Crown, having recently conquered Ireland, decided to colonize the Catholic island nation with Presbyterian Scots, who were becoming a surplus population in Lowland Scotland. These “Ulstermen” and their families moved to northern Ireland, where they attempted to scratch out a living on the rocky soil. Like their Irish neighbors, they soon found that working for the English landlord was a losing proposition, due to the expensive “rack rents” put on all cash crops like wheat and potatoes. Pretty soon, the Scots-Irish figured out a way to beat the system — distill the produce into liquid form and sell it on the black market. They made the whiskey late at night under a harvest moon and called it “moonshine.” Tax issue solved.
A generation later, unhappy with their step-child status in northern Ireland, the Scots-Irish began to migrate by the hundreds of thousands to America. They originally landed in Pennsylvania, then migrated south down the Valley into western Virginia and western North Carolina — the “border country” of frontier America. Pretty soon, they had filled up the ravines and valleys across the Appalachians with small farms. And, yes, they brought their recipes for “moonshine,” as the old Irish whiskey was called, both for personal consumption and for sale.
These small farmers were pretty much ignored, until the first U.S. Secretary of Treasury, the New Yorker Alexander Hamilton, came up with a Bloomberg-esque idea to raise revenue while tackling a public health issue – tax the sale of whiskey which was becoming a big market out west. The frontier went up in arms. The resulting “Whiskey Rebellion” almost ended the United States before it started.
A few years later, President Thomas Jefferson repealed all Federal taxes on whiskey and the mountain counties remained safely Democratic for a hundred years. During this time, liquor production was still a small-time affair in rural communities in western Virginia, which lacked access to railways or roads. Alcohol consumption and production in the 19th century (and there was a lot of it) was driven by big-city breweries and distilleries.
All that changed with Prohibition. In 1919, the U.S. adopted the Volstead Act which made the production and sale of alcohol illegal. All major breweries and distilleries were closed. America went dry.
Suddenly, the family stills in western Virginia became relevant again. Isolated by geography and time, the mountain residents still had the recipe for “moonshine” and now the demand for illegal liquor was off the charts. There have been a lot of histories written about Franklin County (“the Wettest County in the World”) and neighboring counties like Franklin and Henry which were deeply involved in moonshine sales during Prohibition. I won’t duplicate it here. Suffice to say that a black market economy was created, which was legendary in scope.
With the repeal of Prohibition, the economic demand for “moonshine” mostly disappeared and things returned to normal. In Virginia, the repeal led to the 1935 creation of the Alcohol Beverage Commission (or “ABC”) which regulated and taxed all sales of alcohol, at least in those counties which allowed it. (By now, it’s all of them)
The system works as follows: ABC itself handles the distribution and sale of spirits and hard liquor (whiskey, vodka, etc). For beer and wine, it established a “three tier” system, which requires all brands to sell their products through a distributorship, which then supplies convenience stores, grocery stores and restaurants. The advantage is that quality can be managed and taxes collected from the distributors, while retailers must obey laws relating to the marketing and sale of alcohol.
As a result of this system, Virginia has a robust market with lots of consumer choice (like farm wineries or the new micro-brews) and competitive prices, which also provides local jobs and a revenue stream to the Commonwealth. By and large, it’s a system that’s both safe and accountable.
You no longer need a shotgun or an iron cask to have a drink in Virginia. But that is how it all got started.