October 14, 2010 in Opinion

Editorial: I-1100 finds balance in privatizing liquor sales

 

Since the end of federal Prohibition, most states have gotten out of the business of selling booze, but Washington has not. We still have special state-run stores for “spirits,” which is alcohol that isn’t beer and wine. In pondering the two Washington state initiatives about hard liquor sales, it’s worth asking why the state wants control in the first place. The traditional response is to minimize the social costs of drinking. Without state controls, proponents say, underage drinking, drunken driving and other negative outcomes will increase.

But the data are inconclusive. The Common Wealth Foundation in 2009 compared “control” states such as ours with other states and concluded: “Evidence from 48 states over time shows no link between market controls and these social goals.”

The most compelling argument for the status quo is that state and local governments would lose revenue in very difficult budgetary times. That’s why you see police officers and firefighters campaigning against the two initiatives that would loosen the state’s grip. But even in good economic times, the Legislature hasn’t been able to wean itself from this revenue source.

Quite simply, it makes no sense for the state to be in the liquor business. But that doesn’t mean both initiatives should pass.

Initiative 1100 would end the state’s markup but retain the excise tax. It would close the state’s liquor stores and allow private businesses to take their place. It would also end the state’s control of distribution. As a result, competition would probably lower prices on all forms of alcohol. Initiative 1105 would end the markup and the excise tax but would require that purchases still be made from distribution centers, much to the delight of the handful of distributors. This would inhibit the competitive pressures that lower price. I-1105 does have a provision that directs lawmakers to devise a replacement tax. But if Initiative 1053 passes – and it’s doing quite well in polling – any new tax would have to garner two-thirds approval in both legislative houses. Barring that, I-1105 would cost the state an estimated $520 million a year. Under I-1100, the state would forgo $85 million. Local governments would also lose money.

These estimates do not include the increase in revenue from business and occupation taxes and license fees via the proliferation of private liquor operations. State Auditor Brian Sonntag has estimated that the state could raise as much as $277 million over five years. Municipalities with a B&0 tax would also see more money, but the city of Spokane does not have such a levy. Unquestionably, both measures would hurt tax collections for many local governments at a tough time. But other state and municipal governments have been able to get by without the extraordinary controls Washington state has placed on liquor sales.

The Legislature should have privatized liquor sales a long time ago. Voters cannot be blamed for doing it now. We recommend a vote for I-1100 and against I-1105.

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