Slog

News & Arts

The Stranger Suggests

Critics' Best Bets
Music Arts & Food


Line Out

Music & the City
at Night

Thursday, June 17, 2010

Dueling Booze Initiatives Could Each Cost the State Millions

Posted by on Thu, Jun 17, 2010 at 11:40 AM

Two initiatives are circulating to end the state's monopoly on liquor stores and allow stores to sell hard liquor. Either or both could make the ballot. We've argued in the past that these sorts of measures—at least in theory—make sense and would get the state out of the contrary roles of selling liquor while discouraging drinking. If done properly, privatizing could make the state millions of dollars. But these two measures could have the opposite effect.

"What we're looking at is a time bomb that could potentially wipe out all liquor taxes in the state," says Sandeep Kaushik, a political consultant for Fuse Washington.

Some quick background: Washington has the highest liquor tax rate in the country, which means booze is pricey for the public, but we can fund a lot of stuff. In 2008, the state generated roughly $322 million in liquor taxes and revenue (about $101 million in taxes and $221 million in revenue). A recent state auditor's report proved the state could increase revenue by as much as $277 million over five years by changing its current model (auditor's .pdf).

The two liquor initiatives, which are among the record 79 initiatives filed this year, each needs to gather 241,153 valid signatures by July 2 to make it on the November ballot. Both gathering healthy donations and reportedly on track signature-wise to meet this goal.

Here's how they'd work: Both initiatives—I-1100 and I-1105—would get the Washington State Liquor Control Board (WSLCB) out of the booze-selling business and give current beer-and-wine-license holders—like grocery stores—the ability to sell hard liquor. The initiative sponsors argue that the state would save money by cutting the costs of operating roughly 155 state-run liquor stores, as well as cutting roughly 1,000 state salaries. Furthermore, the state would make money by selling off its liquor distribution building and all its equipment.

But the problem with both 1-1100 and I-1105 is that they could potentially cost the state more money than they'd make.

The fatal flaw with the I-1105, which we'll call the "Liquor Reform" initiative, is that that it would repeal liquor taxes entirely (about $101 million a year that goes into the state general fund, and to cities and counties). The initiative then sets the WSLCB the task of recommending new tax rates to the legislature. This could be disastrous if Tim Eyeman's Initiative 1053—which would require a two-thirds legislative majority to increase taxes—were to pass. If both Liquor Reform and Eyeman's initiatives were to pass, taxes on all liquor sales would be repealed and the legislature would have a next-to-impossible time approving new ones with a two-thirds majority vote.

The problem with I-1100, which we'll call the "Costco Initiative," is that it makes its money primarily through licensing. Under this initiative, businesses would have to pay an annual fee of $1,000 to sell liquor (as well as a one-time $1,000 application fee). Liquor distributors would have to pay $2,000, and they would also be able to sell liquor to the public. This means that bigger retailers like Costco can become distributors for relatively cheap and then sell their own liquor (while smaller mom-and-pop liquor stores would still have to buy their liquor from someone else). This initiative also lets retailers set their own markup (say a liter of liquor is $5 and a retailer sells it for $7, whereas the state might've sold it for $10). Again, larger retailers like Costco could lower their prices to be competitive. The auditor's report estimates that the markup of liquor (which the state currently sets at 51.9 percent) would drop to the range of 13 to 33 percent. This means cheaper liquor for the public but a huge loss in revenue for the state.

"We’re talking about wiping out $221 million in revenue and replacing it with a thousand-dollar flat fee that will generate maybe $500,000 thousand," says Kaushik. "Even if we keep the taxes, that’s still only $100 million. It's a huge hit."

Sharon Gilpin, spokeswoman for the Costco initiative says, "The revenue generated is all about taxes—we’re leaving that up to the legislature to formalize." Which means, once again, that Eyeman's I-1053 would be disastrous if passed.

I'm gung-ho for changing the rules, but neither of these initiatives privatizes liquor sales properly. The Liquor Reform Initiative smartly assigns the WSLCB the task of setting liquor tax rates for the legislature that would generate at least $100 million over the first five years and would place a tax the quantity of liquor sold. If not for Eyeman's initiative and the potential shit-storm that would cause, I would enthusiastically back this initiative. The Costco initiative completely derails our current system in favor of free-market liquor sales, which would mean the state would take a huge hit in revenue. This is a bad idea.

 

Comments (29) RSS

Oldest First Unregistered On Registered On Add a comment
Fnarf 1
Bullshit.

I don't give a shit about liquor taxes, and neither do most of the proponents of liquor sales reform. I don't mind paying taxes. I LOVE paying taxes. Raise the taxes all you want.

What I object to very strongly is the idea that a simple, legal product has to be sold in special stores run by the state. LIQUOR IS NO DIFFERENT THAN SHOELACES OR HAIR GEL. These stores are a relic of Prohibition, which was a lifetime ago.

The Eyman law is something entirely different, and if passed it screws up a hell of a lot more than just liquor taxes. Kaushik is trying to conflate the two, but they are NOT RELATED.

Kill the stores, open up liquor sales to the variety available in the marketplace instead of the three brands I can get at my local store, and set the tax wherever the hell you want.
Posted by Fnarf http://www.facebook.com/fnarf on June 17, 2010 at 11:48 AM
Will in Seattle 2
You mean we should sell cigarettes and marijuana on street corners, Fnarf?
Posted by Will in Seattle http://www.facebook.com/WillSeattle on June 17, 2010 at 11:55 AM
slake 3
Hey, I'm all for paying taxes (lots of friends & fam either in IRS or state treasury depts), but having the highest liquor taxes and having a stupid middleman delivery program just begs for some sort of reform. Just like having some of the highest car tabs led to the unfortunate rise of the Eyeman, both of these will probably pass because the legislature is too stupid to come up with reasonable reform on it's own.
Posted by slake on June 17, 2010 at 11:55 AM
4
what are you talking about? the tax on liquor will still be there. the markup the state charges will be gone. Where does Kaushik get his info? I find no such analysis on the Fuse Washington site.

"The existing tax on liquor will remain and it will be up to the Legislature to adjust the amount of tax.

The initiative mentions a 10% tax on purchases of spirits by restaurants. This is not a new tax or a tax increase. This is a technical update to current law, and merely requires private sellers to collect the existing tax which is now collected only by state stores."
Posted by beef on June 17, 2010 at 12:01 PM
5
I'm with @1. Cienna's post basically says that liquor buyers are currently getting reamed by the state, and we shouldn't approve either of these initiatives because the state wouldn't be able to continue reaming us.

I'm all for paying taxes and definitely won't vote for any of Eyman's nonsense, but I'm not going to vote against a good initiative just because things could be fucked up by a separate bad one.
Posted by fbc on June 17, 2010 at 12:02 PM
6
my quote is from the the Costco sponsered I-1100. :)
Posted by beef on June 17, 2010 at 12:02 PM
TheMisanthrope 7
Avoiding the easily made socialist accusations of this post (because, this whole entry reeks of socialism), one can easily get to the heart of the matter of what the public wants.

We want choice. We want ease of purchase. We want liquor purchasing times to be later than 8:00pm at most stores (or having to drive a couple of miles for an emergency 10:00pm purchase).

Liquor is considered by most states a substance that is subject to Sin Taxes, much like cigarettes. Most people know this. Most people don't mind as much (though, if you start getting ridiculous like cigarettes, there may be some backlash).

Privatization also keeps prices down because there is competition. But, taxes will go up. I don't care. I just want to buy a bottle of booze after 10 or 11pm sometimes. And, fuck the state for treating that as a crime.
Posted by TheMisanthrope on June 17, 2010 at 12:04 PM
SchmuckyTheCat 8
@3 gets it right.

Remember when the smokers, bars, and restaurant lobbyists refused to compromise on an indoor smoking ban? When one side of the table refuses to compromise, then the other side gets to set the agenda.

The states antiquated system teetered along for way too long because nobody in the legislature had the balls to take on the WSLCB and the harpies at MADD, et al. The legislature will have the ability to modify shortcomings in the initiatives (either or both) in upcoming years. There is no disaster, except to the entrenched minority interests of modern day liquor moralists.
Posted by SchmuckyTheCat on June 17, 2010 at 12:11 PM
9
The objections stated here all seem to hinge on 'if initiative 1053 passes'. For one thing that is a big 'if', for another an assumption is being made that the legislature could not somehow maneuver around it even if it passed to keep current liquor taxes in place. Seems kind of unlikely if either of the privatization initiatives make the ballot but don't pass we will be getting another chance soon to get rid of the idiotic, puritanical business of state-run liquor stores.
Posted by Rhizome on June 17, 2010 at 12:12 PM
Simone 10
I've been seeing signature gatherers with initiatives and claiming that there is a tax on food that needs to be repealed or something. I think this was in front of a walmart or target. What's up with that. I bet they were misleading the people who crowded around thinking that their apples and oranges were taxed (they are not) when it really is their precious soda and candy.

I don't care one way or another about liquor as I don't drink any. Maybe the one time every 5 years or something. However this turns out I hope it helps the state and brings in money for needed services.
Posted by Simone on June 17, 2010 at 12:23 PM
Will in Seattle 11
Hey, what's a $330 million dollar larger budget deficit between friends, right?
Posted by Will in Seattle http://www.facebook.com/WillSeattle on June 17, 2010 at 12:31 PM
wilbur@work 12
You're wrong about I-1100. May be a bad idea for you, but it's good for liquor consumers. Vote with your wallet, or crawl back into your hole - nothing else matters.
Posted by wilbur@work on June 17, 2010 at 12:36 PM
TacomaRoma 13
Privatizing liquor sales will lead to cheaper booze late into the night. Hooray!

It will also lead to state revenue shortfalls, higher crime, and higher social costs (domestic violence, substance dependency, consumption and abuse by minors). I suppose the police and social services folks don't really have that much to do now, so this will help to keep them busy during the slow times between midnight and 3am. It's a good thing those services are literally swimming in cash and available personnel right now!

I'm comfortable with the current system. The prices I pay for booze are fine. I can choose from a stunning selection of liquor and wine from a clean, well-lit store within a few miles of my home run by local folks. I don't see why this issue is so contentious. We, the state, make a lot of money from controlled liquor sales and it's actually pretty convenient to go to a liquor store and buy your stuff. Lots of well-paying jobs with good benefits have been created by this system and you all seem to be willing to throw it away for a $2 savings on a plastic bottle of Relsky Vodka.

I don't see how the benefits outweigh the drawbacks. And if you're looking around for a new bottle after 10pm, you might want to take a good, long look in your mirror and ask, "Why can't I plan my drunks better?"

And yeah, #1, Prohibition was a lifetime ago. So was the Great Depression and the Power Pirates. Might as well dismantle these laws too, since we don't understand them and have no memory of history or why they were put in place either. The S&L Crisis, Enron and The Banks have done wonders for our country (and both came about because the regulations that controlled those industries were dismantled by ignorant and corrupt lawmakers), why shouldn't privatizing liquor sales do the same for our state?

The Right Wing has been very successful framing every argument against regulation as if that regulation just appeared in a vacuum and never had any reason to exist other than to inconvenience you, Joe (or Josephine) Paycheck. Way to buy into the madness, Slogites.
More...
Posted by TacomaRoma on June 17, 2010 at 12:45 PM
14
This is what happens when the legislature refuses to do its job because it is captured by status-quo interests. As California has shown, the initiative process is a terrible way to govern a state.
Posted by Brad9999 on June 17, 2010 at 12:46 PM
Durang Durang 15
Or perhaps we should stop relying on sin taxes and the like, and just get an income tax. I've lived in several states with an income tax, and two without. Income tax was a lot cheaper in the long run, if you spend any money at all on things like say, soda/liquor/cigarettes/clothes etc.
Posted by Durang Durang http://www.busygamernews.com on June 17, 2010 at 12:59 PM
Will in Seattle 16
Or maybe we could just mug poor people like we usually do.

And realize that the subsidies we pay for cheap gas and oil are paid for with our taxes.
Posted by Will in Seattle http://www.facebook.com/WillSeattle on June 17, 2010 at 1:05 PM
elenchos 17
Sin taxes are regressive. And they give the state a perverse incentive to encourage immoderate consumption of unhealthy things. The state should collect no money at all on booze or candy or cigarettes or gambling.

We should eliminate all sales tax, and especially sin taxes, and rely on a progressive income tax alone. And the state should make it easy for cities and counties to tack on their own income taxes with minimal overhead on tax collections, provided they too eliminate sales taxes.
Posted by elenchos on June 17, 2010 at 1:08 PM
Hernandez 18
@17 For the true and terrible win. The way the system is now, the state needs as many alcoholics, tobacco addicts, and (now) folks shoveling in unhealhty soda and candy as it can get. Because that's how we've decided we're going to prop up our state government. The next time any one of you walks past a smoker, or a bum nursing a bottle of cheap vodka, or a fat kid shoveling in candy and washing it down with soda, you'd better not look at them with disgust or contempt; you'd better thank them for helping close the revenue gap. We need to get an income tax and do away with the bullshit system we're clinging to.
Posted by Hernandez http://hernandezlist.blogspot.com on June 17, 2010 at 1:27 PM
giffy 19
@13 " The prices I pay for booze are fine. I can choose from a stunning selection of liquor and wine from a clean, well-lit store within a few miles of my home run by local folks. "

I don't think we shop at the same state stores. The selection for example of single malt scotches is horrible.

Do you have any evidence that the rates of DUIs, DV, and the like are different based on the mode of distribution?
Posted by giffy on June 17, 2010 at 1:31 PM
20
I love regressive taxes!
Posted by 100K/year earner on June 17, 2010 at 1:31 PM
TheMisanthrope 21
@13 So, you're saying that we need the shortened hours of the liquor stores to protect the masses from themselves. Thank you for caring about me and mine, nanny.

Or, maybe you're saying that we need the shortened hours to better control the drunks. So, instead of allowing people to drink at home, they have to go out to the bars where the bartenders and bouncers have to watch over them. Way to pass the buck.

Or, maybe you're saying that the rich only have a right to get obliterated after 8pm, since bars are so expensive.

Or, maybe you're saying that people who work retail have no right to buy alcohol by the bottle, except on their days off...or on their lunch break.

Or, maybe you're not saying any of those things and just saying that privatizing liquor and extending hours will have a perceived social cost that isn't there from grocery store beer and wine sales.

...

Does anybody really know what would solve a lot of the contention against the liquor stores? If the WSLCB instituted a system to order other brands quickly and easily, carried more variety, and had 2am closing times. This would create more revenue, and create more jobs.

I'm not against state run liquor stores, really. But, I'm against their puritanical hours, and their mandated brands. I don't like those decisions being made for me.
Posted by TheMisanthrope on June 17, 2010 at 1:41 PM
Packeteer 22
Taxes are liquor work well because you target somewhat of a minority group. People that don't drink liquor are generally ok with the taxes. This is the typical tyranny of the majority that can happen in a democracy.

The argument here is that we will lose revenue if we lower the taxes but that can be made with any product. If we don't drastically increase the taxes on Hispanic food stores our state won't be able to pay for police but nobody is considering increasing those taxes.

The fact that liquor is singled out as part of the general fund is bullshit. You can argue that a liquor tax should go to treatment of alcoholism but to say that liquor drinkers should carry more of the burden than everyone else is completely unfair. The same goes for candy and pop and any other "sin" tax. Why are we not increasing the tax on porn to balance our budget?
Posted by Packeteer on June 17, 2010 at 1:48 PM
smade 23
Try getting a bottle of yellow chartreuse or creme de fraises anywhere in the state except seatte. The current liquor distribution system suxks the hairy root.
Posted by smade on June 17, 2010 at 1:58 PM
24
What happens if both 1100 & 1105 pass?
Posted by I Got Nuthin' on June 17, 2010 at 2:19 PM
T 25
"The fatal flaw with the I-1105, which we'll call the "Liquor Reform" initiative, is that that it would repeal liquor taxes entirely (about $101 million a year that goes into the state general fund, and to cities and counties). The initiative then sets the WSLCB the task of recommending new tax rates to the legislature."

That is utterly insane. It doesn't even seem constitutional to be honest, but I'm no legal expert.

@17 Nailed it, but I have a feeling it'll be a loooooooong time before we deal with our regressive taxation problem.
Posted by T on June 17, 2010 at 2:21 PM
Sir Vic 26
Internet folks, internet. I get a wide variety of premium spirits, at reasonable prices, by ordering online. The cost of shipping comes nowhere near the difference in price vs. the WSLCB store rates.

Shame on Sienna Madrid for not including the most important piece of information about the two initiatives. Who stands to profit the most? (first rule of political reporting - Follow the Money!)
Obviously, Costco stands to benefit from I-1100, as would other large retail chains (Kroger, etc.). These are businesses that do more than sell booze, and employ a lot of people in the state. From what I have heard, I-1105 stands to benefit the existing WSLCB approved distributor network. These are businesses that exist solely for the purpose of marking up the price of liquor in the state, and do not employ a large workforce. They serve no other function than to profit from a poorly made set of laws.

Which type of business would you like to see succeed in this state?
Posted by Sir Vic on June 17, 2010 at 2:25 PM
27
I'm in full support of these.

I'll bet the state figures out how to tax it just fine... I don't know if you've noticed but they always figure out how to tax me plenty.
Posted by SeattleSeven on June 17, 2010 at 3:38 PM
28
Yeah, what @ 24 said. What if both make the ballot and both pass - as seems reasonably likely?
Posted by RonK, Seattle on June 17, 2010 at 5:59 PM
29
Are you aware that almost HALF of the liquor stores in Washington State are private contract stores? CLS (contract liquor stores)make the State MORE money because the State does not pay for rent, employees, window washers, floor cleaners, adding machine tape, files, pens, etc. What happens to us, the Contract Liquor Stores if this passes? Are we just out of business? Is the State going to say, OK, pay me now for all the booze you have in your store? I have about half a million dollars in product in my store right now. I don't have half a million dollars in the bank. Do I drop my inventory down to 3 different vodkas? How many distributors am I going to have to deal with to get my order each week? Right now it is 1, WSLCB.

Costco doesn't care about you, they care about profit. WSLCB is a non-profit, funding the general fund. Look for a State Income Tax if Costco gets their way.

And what happens to all of the State Employees working at the Distribution Center and all of the State run stores? Unemployment, food stamps and loss of retirement benefits?

This is a BAD idea, Costco just wants your money and doesn't care about our State.
Posted by Contract Liquor Store better keep my mouth shut on July 4, 2010 at 12:05 PM

Add a comment

Advertisement
 

All contents © Index Newspapers, LLC
1535 11th Ave (Third Floor), Seattle, WA 98122
Contact Info | Privacy Policy | Terms of Use | Takedown Policy