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.