To keep business, Washington considers cutting alcohol taxes

OLYMPIA – In an effort to keep Washington’s liquor drinkers from heading to Idaho or Oregon for cheaper booze, some legislators are looking at cutting alcohol sales taxes.

That could cost the state as much as $68 million over the next five years, according to one estimate, but a sponsor of the proposal said she believes increased sales and jobs would offset that.

Sen. Janéa Holmquist Newbry, R-Moses Lake, said high prices are “chasing Washingtonians out of our state” since voters approved Initiative 1183 to privatize wholesale and retail liquor sales. Idaho was attributing a $10 million boost in sales last year to Washington shoppers.

“I’m sure they’re smiling about this,” she said.

Washington has a series of taxes and fees on liquor, in part to help replace the profit the state previously made when it owned the wholesale and retail system. Some of them are a result of the 2011 initiative, which should have been revenue neutral, said David Ozgo, chief economist for the Distilled Spirits Council.

“The new fees made it anything but revenue neutral,” he said.

The state has the nation’s highest retail sales tax on liquor, at 20.5 percent. It also charges a 10 percent sales tax on sales to restaurants and bars.

Holmquist Newbry has a bill to lower the retail sales tax over eight years to the 6.5 percent charged on other goods, and eliminate the tax on sales to restaurants and bars. Local sales taxes, which currently aren’t charged on liquor sales, would be levied to provide more tax revenue to cities and counties.

An estimate by the Office of Financial Management said this could be a hit to the state general fund of $21.3 million in 2015-17, and $46.7 million in 2017-19. The fiscal analysis assumes a slight increase in sales, but Holmquist Newbry argued it doesn’t account for jobs that would be saved in liquor stores and at craft distilleries having trouble selling their higher-priced liquor because of the taxes.

It also doesn’t account for the fact that so many Washingtonians are crossing the border for liquor that Idaho built a new store to serve those customers, said Sen. Mike Hewitt, R-Walla Walla.

The bill has bipartisan co-sponsors but was just introduced Wednesday, with two weeks left in the session. It would need to be fast-tracked to have a chance of passing.