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Thursday, September 6, 2012

Washington New Privatized Liquor System Is Becoming a Cautionary Tale for Other States

Posted by on Thu, Sep 6, 2012 at 2:32 PM

Our privatized liquor system, which we voted into existence with initiative 1183, is becoming national news.

The Wall Street Journal seems to think we voted against our own interests—in fact, our system is so screwy that it's become and object lesson against privatization.

And while those sales and excise taxes remain under privatization, new fees further raised prices: Liquor distributors must pay an additional 10% levy, and retailers another 17%. Distributors also are on the hook for any shortfall to the state if they don't generate $150 million from the 10% fee by April.

"It's astronomical and confiscatory for the consumer,'' said David Ozgo, chief economist at the Distilled Spirits Council of the United States, which represents U.S. liquor suppliers.

The spillover could potentially damp privatization elsewhere. "It's slowing down the process in others states. It's turning into a negative,'' said Craig Wolf, president of Wine & Spirits Wholesalers of America, a national industry group for wholesalers.

Maybe initiative 1183 is just another brick in Goldy's argument for why the initiative process looks good in theory, but actually sucks.

 

Comments (50) RSS

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Joe Szilagyi 1
In all reality what would have happened if we just deregulated booze to the level of beer?
Posted by Joe Szilagyi on September 6, 2012 at 2:41 PM · Report this
2
If these liquor producers really hated the taxes that much, they'd just pay Tim Eyman to put an initiative on the ballot to lower them.
Posted by mloar on September 6, 2012 at 2:57 PM · Report this
balderdash 3
We suddenly gave private retailers the ability to charge whatever they wanted for booze, AND a giant tax burden on top of that, and we were shocked - SHOCKED! - when they didn't all spontaneously drop their prices to half what we were used to paying. It's almost like they care more about making money than fulfilling our colossally stupid dreams of snatching cheap booze out of the claws of the nanny state!
Posted by balderdash http://introverse.blogspot.com on September 6, 2012 at 2:59 PM · Report this
4
It doesn't even look good in theory. Representative democracy for a reason, you know.
Posted by ejamadoodle on September 6, 2012 at 2:59 PM · Report this
mrbarky 5
I voted for it. I'm for socialized medicine, but not liquor. The state has no business selling hooch.
Posted by mrbarky on September 6, 2012 at 3:00 PM · Report this
Gay Dude for Romney 6
This is why liquor sales should have never been controlled by the State the first place.
Posted by Gay Dude for Romney http://mittromney.com on September 6, 2012 at 3:04 PM · Report this
7
I like it still, more convenient, and sure got to pay more but got to pay for convenience you know.

Plus state has no business in the liquor business.
Posted by Seattle14 on September 6, 2012 at 3:05 PM · Report this
meanie 8
I love how talk like this completely absolves the past decades of liberal leadership who were just fine with prohibition style blue laws, and never lifted a finger to come up with legislative solution to something that was clearly an issue with the voters.

The initiative process is flawed, but its the last bastion of the voters when the legislature is too stupid, partisan, or cowardly to make real decisions or change.

Remember every Eynman push that has been overturned, has been passed boilerplate with no changes after the fact by Olympic to appease voters. Even when handed a issue, they are incapable of decision.
Posted by meanie http://www.spicealley.net on September 6, 2012 at 3:06 PM · Report this
Fnarf 9
I'm confused. The liquor tax -- both of them, the straight sales tax and the per-liter tax -- are exactly the same as they were before. I understand that distributors are paying an additional 10%, but what's this 17% levy? I don't think that's true. I think the WSJ is wrong.

The way this was handled is absolutely an object lesson in how not to do it. I notice as I drive around that almost all of the former WSLCB stores, which were all bid on, are closed now, and most neighborhoods have no liquor stores except for groceries, and there is STILL no reliable way to find out where the stores that do exist are (Google Maps is STILL full of WSLCB locations (and bars) and little else). Which means that for your average consumer, unless he or she is lucky enough to be near one of the handful of superstores, has seen their prices go way up and their selection go way, way, way down.

The 10,000 sq. ft. rule is an abomination unto the Lord. Alcohol is proof that God loves us and wants us to be happy, ,as the man said. The State of Washington, on the other hand -- neither.

I expect as much as 20% of sales have been driven to OR or ID or even BC, or online. Again, great if you can afford to travel, screwed if you can't.

On the other hand, I'm lucky -- I'm near Wine World, and while they are hideously expensive they are now carrying Suze -- the first time it has been available anywhere in the US for 20-odd years. Yes, even LA or NYC.
Posted by Fnarf http://www.facebook.com/fnarf on September 6, 2012 at 3:08 PM · Report this
10
Since privatization, (state) liquor stores in Oregon and Idaho, just across the state line, have seen a surge in sales from WA state residents seeking to purchase there instead.
Posted by TJ on September 6, 2012 at 3:10 PM · Report this
In your heart you know he's right 11
You don't need booze to live and if this makes fewer people drink then it's worth it. We also don't have have 900 or so entitled state employees living off of the taxpayers.
Posted by In your heart you know he's right on September 6, 2012 at 3:10 PM · Report this
DeaconBlues 12
@11

so you subsist entirely on the absolute bare essentials?

bread, water, soy, and vegetables?
Posted by DeaconBlues http://radzillas.blogspot.com/ on September 6, 2012 at 3:18 PM · Report this
Max Solomon 13
I still can't get Borsci San Marzano or Amer Picon, even at Wine World. No Ramazotti, either. so i'm pissed off.
Posted by Max Solomon on September 6, 2012 at 3:20 PM · Report this
topbrian 14
Yes, 1183 is a perfect example of why the initiative process sucks. It's bad law - it was obvious before the election that it was bad law, and the situation we find ourselves in now was entirely predictable. But I still voted for it, because in our stupid system, the legislature never would have acted on privatization on their own, especially if we had voted it down 3 times in a row. Hopefully in 2 years the legislature will be forced to clean up the mess, and we might end up with a halfway reasonable system.

Our initiative process creates a disincentive for legislators to take up issues like this, and then lets bad law (bankrolled by special interests or written specifically to appeal to uninformed voters) get enacted.
Posted by topbrian on September 6, 2012 at 3:25 PM · Report this
In your heart you know he's right 15
@12 that's about right and cheese.
Posted by In your heart you know he's right on September 6, 2012 at 3:27 PM · Report this
Dougsf 16
This isn't an argument against privatization, it's an argument against Washington's state income tax structure. The bill itself sure didn't allow for the cleanest transition from public to private as far as consumers are concerned, but at least the band-aid has been ripped off.

@9 - I've never tried Suze, always assumed it was a bit like Campari. Am I close?
Posted by Dougsf on September 6, 2012 at 3:34 PM · Report this
17
My preferred brand of Scotch is no longer available, and if it was would be twenty or thirty dollars more a bottle, if the comparable competition is any indication. And, I can't order it online in this fucked up state. I guess that trip to Oregon in a few weeks is going to serve multiple purposes.
Posted by tiktok on September 6, 2012 at 3:40 PM · Report this
18
What 1183 was an example of what fear mongering does. 1101 (or the intiative the year before) opposition produced SO MUCH hyperbole it forced 1183 to be written in attempt to dismantle the opposition's argument before it could be made.

What we ended up getting was a cluster fuck of a process.

Like others have said before...the state should not have been in the liquor business to begin with!
Posted by Will up North on September 6, 2012 at 3:41 PM · Report this
Pope Peabrain 19
Fnarf soaks his dentures in Oouzo at night.
Posted by Pope Peabrain on September 6, 2012 at 3:46 PM · Report this
20
*shocked* I agree with @6 (Gay Dude). I am therefore going to bury myself in a deep hole so this never happens again.
Posted by originalcinner on September 6, 2012 at 3:49 PM · Report this
balderdash 21
@11, now all that work is done by approximately the same labor force of private employees living off of exactly the same liquor sales revenue. How exactly is that less "entitled" or somehow morally superior? It's all booze sales.
Posted by balderdash http://introverse.blogspot.com on September 6, 2012 at 3:52 PM · Report this
wisepunk 22
Huh, so we are arguing here that the price didn't drop immediately on booze, so privitization was a failure in this case. Isn't this the same argument that republicans are making against Obama? He didn't clean up the mess that others made fast enough. It's a simplistic bullshit argument in both cases.

There are retailers that are screwing people right now on liquor prices, because the system hasn't really had time to adapt and compete. Hell, the old WSLCB next to Safeway on Rainier still has the old state price tags up on the racks, PLUS the new taxes. Fnarf is right too, that the 10,000 sqft rule is really not helping things. There should be more selection, there should be more retailers. Let's let the process unwind, let the market take it's course, let's tweak some laws and see where we are at in 24 months.
Posted by wisepunk on September 6, 2012 at 4:03 PM · Report this
23
@15, you need cheese to live. How decadent and unnecessary of you.
Posted by legacy builder on September 6, 2012 at 4:08 PM · Report this
24
I don't mind privatized liquor. I mind big corporations like Costco setting the terms for the privatization laws. That was a huge red flag to me, and I voted against it (among other reasons). Now I can't get my Cynar seemingly anywhere in the state, and my favorite tequila is $10 more!

I also feel bad for my neighborhood liquor store, who can't seem to compete with the low prices of nearby Safeway.
Posted by mitten on September 6, 2012 at 4:09 PM · Report this
25
*dont
Posted by legacy builder on September 6, 2012 at 4:09 PM · Report this
26
Can't you just go to tribal stores?...it's closer than the border(s).
Posted by shotsix on September 6, 2012 at 4:30 PM · Report this
DeaconBlues 27
@15

awesome

what makes you think I want to live like that?
Posted by DeaconBlues http://radzillas.blogspot.com/ on September 6, 2012 at 4:37 PM · Report this
Fnarf 28
@16, you're wrong, but not by a million miles. It's sweeter than Campari, and the bitterness is different. More vanilla than orange. What can I say -- it's French, not Italian. It's heavenly, that's for sure.

@13, I'm positive I saw Ramazzotti at Wine World. Maybe they were out. Maybe I got the last bottle!

@17, if you can't handle the jacked up prices on single malts, give Black Bottle a try -- it's a blend, but I believe it contains all seven major Islay malts (no Kilchoman), and it really expresses the heart of Islay tang -- plenty of smoke. It's not Lagavulin, but it's pretty damn good, and it's only $26 (plus tax) at Wine World. Another good Islay-based blend for cheapskates is White Horse, but WW doesn't have it; I dunno who does (I only ever saw it at Greenwood and West Seattle in WSLCB days).

I'm still mad that my beloved Zaya rum DOUBLED IN PRICE, and no, I'm not going to let it go.
Posted by Fnarf http://www.facebook.com/fnarf on September 6, 2012 at 4:42 PM · Report this
Fnarf 29
@19, I don't wear dentures, and I can't stand Ouzo, but I do soak my balls in a nice vieux St. James rhum agricole, if you'd like some of that.
Posted by Fnarf http://www.facebook.com/fnarf on September 6, 2012 at 4:55 PM · Report this
TheMisanthrope 30
No, really, this was a terrible law. You who are bitching, saying you thought it was terrible but still voted for it, you suck. Unironically, unambiguously, you're what's wrong with the initiative process, and with democracy in general. You don't vote in flawed laws, unless you know that the flaws are either minor or easily and promptly changeable. The 10,000 sqft rule was an abomination. The no decrease in taxes was an abomination. The increase in taxes was even worse. All around, this was one of the worst laws I'd seen.

You naysayers are right, though. The legislation would never have gotten around to it. It was too controversial without a public vote. Which is unfortunate, because if they had, it would have gotten a better, more fair, law.

As an aside, why haven't we received another upper-end income tax law again? This would be a better year to do an I-1098, as liberals and poor people tend to vote more in presidential years than off years. Of course, it was a spectacular fail, but it was still a fail, in part, of timing.
Posted by TheMisanthrope on September 6, 2012 at 4:56 PM · Report this
31
As a non-Washington slog reader, I'm curious about pricing as a point of reference. I live in city/county with high taxes on everything taxable, and my state has never had state-run/regulated booze operations outside of a complicated tax code.

So how much does it cost before and after 1183 to buy a bottle of liquor or a six pack of beer after tax? Say, a regular 750ml bottle of cheap bourbon, like Jim Beam? Or a six pack of Corona?

Posted by bipppp on September 6, 2012 at 5:06 PM · Report this
internet_jen 32
Well, those other state legislatures should take warning of inaction on the subject because if they idle too long their citizens may pass an imperfect initiative too.
Posted by internet_jen on September 6, 2012 at 5:16 PM · Report this
33
I'm going to OR next weekend, any requests?
Posted by wxPDX on September 6, 2012 at 5:19 PM · Report this
Fnarf 34
@31, six packs aren't part of the new law; you've been able to buy beer and wine in any grocery since forever.

A bottle of Beam? Before the law, it was $18.95 at the state store -- $13.38 retail price plus $5.57 liquor taxes (as stated in my May price sheet). That's 20.5% sales tax (or $2.74) plus 0.75 times $3.77 per-liter tax (or $2.83).

The tax did not go up with the law. The exact same 20.5% plus $3.77 per liter tax was there before.

Wine World's website is quoting a price of $17.95 for the same bottle. That's retail price; what you will pay at the register is $17.95 plus $3.68 sales tax (20.5% of $17.95) plus $2.83 (.75 of $3.77, same as before). Grand total: $25.40.

That's an increase of 34%, or $6.45 -- but ALL of that increase is due to the increased retail price, not tax increase. The tax did go up, but that's because it costs more, so you pay more sales tax.

The retail price increase isn't 18.95-->25.40; it's 13.38-->17.95. Unfortunately, most shoppers (and Slog commenters) are innumerate, so instead they see "Dag nab it, the price went DOWN from $18.95 to $17.95, but all them taxes!"

Which is wrong.
Posted by Fnarf http://www.facebook.com/fnarf on September 6, 2012 at 5:28 PM · Report this
ItsAllOverNow 35
I agree with the sentiment that the government shouldn't be in the business of slinging hooch but maybe eliminating that revenue stream in the middle of a state budget crisis wasn't the smartest timing.

@11 Those state employees salaries were definitely funded by liquor sales revenue and not by tax revenue.

Posted by ItsAllOverNow http://nowaybro.blogspot.com/ on September 6, 2012 at 5:30 PM · Report this
36
"ALL of that increase is due to the increased retail price, not tax increase."

Bullshit. A big part of that increased price is the 10% levy on the distributors, which you've conveniently left out of your analysis. And it's not just 10% - if the money from that tax does not equal or exceed a total of $150MM by this April, distributors are on the hook for the difference. Almost all of that information is contained in the very post you're commenting on. Jesus. Innumerate indeed.
Posted by Reader01 on September 6, 2012 at 5:48 PM · Report this
37
Buying booze is not more convenient, the combined selection at all three of my local grocery stores is far inferior to my former WSLCB retail outlet. And a trip to Costco is always a pain in the ass.
Posted by publicadministrator on September 6, 2012 at 6:07 PM · Report this
38
Thank you 34. A cheap bourbon shopper's guestimate here in Chicago is that a bottle of Beam costs around $16.50 retail (which includes the IL excise tax of $8.55 per gallon of hard liquor via the seller). The combination of state/county/city sales tax on all goods, including liquor, is 9.5%, plus $2.50 per gallon of distilled liquor in the county and $0.18 per gallon more in the city limits.

I'm not doing good research at all, but around $20-21 is the usual.
Posted by bipppp on September 6, 2012 at 7:12 PM · Report this
long-time reader 39
A 10% levy to distributors, and a 17% levy to retailers. For what? All I can infer is that it's some sort of extra sin tax to remind you how naughty you are.

This doesn't prove that privatization doesn't work. It proves that needless taxes are needless.
Posted by long-time reader on September 6, 2012 at 8:10 PM · Report this
40
@9 "I expect as much as 20% of sales have been driven to OR or ID or even BC, or online. Again, great if you can afford to travel, screwed if you can't."

The comment reminds me of being in England and traveling with a gaggle of friends to France in order to purchase, in bulk, less-taxed booze and wine for personal consumption. I learned to love France on these trips and its very proud and wonderful people. The hangovers during the return to Blighty were unfortunately memorable.
Posted by Fairhaven on September 6, 2012 at 9:11 PM · Report this
41
So, before I-1183 passed, it was bad because the state would lose the revenue that the state-run liquor stores brought in.

After I-1183 passed, it's bad because the the state collects too many taxes from the privatized liquor industry.

The only cautionary tale I see is that legislatures should act before the people vote in a flawed privatization initiative written by Costco.
Posted by madcap on September 6, 2012 at 9:36 PM · Report this
Supreme Ruler Of The Universe 42
A bunch of drunks being charged fair market value for hootch, and paying for my road repairs...keep it coming. As much as you urbists are complaining about how much expensive it is when "you chose whipped..(sneer)" the real joy would be seeing the inebriates down in Randall selling off the furniture for two more fingers worth in the shot glass.

All of this will help the exodus out of WA state proceed apace.
Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on September 6, 2012 at 9:44 PM · Report this
43
Still prefer the new status quo over the old. Just waiting for some new specialty liquor stores to open so I can make some relationships and get my special orders.
Posted by Tawnos on September 6, 2012 at 10:47 PM · Report this
Cato the Younger Younger 44
Come on guys, it takes time for privatization to "work". I mean look at medical insurance and banking! I mean those have been privatized for decades and those are still going take several more decades before they will finally "work".
Posted by Cato the Younger Younger on September 7, 2012 at 7:08 AM · Report this
thatsnotright 45
I have shopped at the broadway market QFC for years and have noticed that wine prices there have gone up consideably in the last 6 months. There are particualr labels I buy regularly and a jump from $13 to $19 is significant. I don't recall taxes on wine were to be affected by liquor privatization I wonder if they are not simply price-gouging. Transportation costs alone cannot account for such increases. anyone else notice this for their fave labels?
Posted by thatsnotright on September 7, 2012 at 11:55 AM · Report this
Fnarf 46
@40, is this you?
Posted by Fnarf http://www.facebook.com/fnarf on September 7, 2012 at 12:28 PM · Report this
topbrian 47
@30 "You don't vote in flawed laws, unless you know that the flaws are either minor or easily and promptly changeable."

Define minor, define easy, define prompt. The legislature can amend a law passed by initiative after two years. So yes, it's a bad law, but the existing one wasn't any good either. Instead of accepting that that was never going to change because the legislature would never act, I was and am OK with having a bad law in place for a couple years, after which the legislature can hopefully get it right.
Posted by topbrian on September 7, 2012 at 1:36 PM · Report this
48
Here is a snapshot of how taxes are working in WA state:

The distributor sells a bottle of 750ml to the retailer for $10. The retailer marks the bottle 20.5% (I will tell you later why I choose this value, but it could be anything) making that bottle $12.05. This is called Listing Price.

Retailer is required by law to sell the bottle with added taxes of SST (Spirits Sales Tax) of 20.5% and SLT (Spirits Liter Tax) of $3.7708 per liter. For the above example 20.5% SST will be $2.47 and for 750ml SLT will be $2.33. Total taxes will be 2.47+2.83=$5.30.

The total price out of the door will be $12.05+$5.30=$17.35. THIS IS HOW MUCH THE RETAILER HAS IN HIS HANDS.

Now the retailer is required by law to pay 17% of the listing price to WSLCB (Washington State Liquor Control Board), as a retailer fee. This amounts to 12.05*17/100=$2.05.

Also, the retailer is required to return to WA Department of Revenue the taxes collected above (SST & SLT), meaning another $5.30.

Add the retailer fee with the taxes and the retailer has to pay $7.35 "to be in business".

He got $17.35 from the consumer, but the retailer has to pay $10 for the goods (to the distributor and $7.35 to the state (for the taxes). HOW MUCH IS LEFT? ZERO, NADA, NILL.

In this process, the retailer transfer a bottle of $10 from the distributor to the consumer, marking the product 20.5%, the state gets $7.35, and the retailer gets ZERO. Imagine how much more he needs to markup the product to cover his costs and pay the taxes. A lot more than 20.5% (which only pays for the taxes).

Welcome to Washington State Privatization. It was not supposed to be like that. It supposed to be free market and competition. None of these are happening now. There are just a few distributors, some with exclusive rights.

Those taxes above are from 10 RCWs, everyone coming with another level of taxation. Maybe more are coming.
More...
Posted by vernon5 on September 7, 2012 at 8:44 PM · Report this
49
DNC highlight reel ----

1- Clinton making the case that:
Obama hasn't gotten the job done-not even close- but, hey!- even a demigod like me couldn't have done it.....(plus reminding everyone how much they miss Bill and what a limp noodle Obama is)

2- The vicious snarling angry rank and file Democraps rejecting God and Jerusalem (with the yummy icing of the total fiasco hamfisted clumsy way in which it was handled, managing to Piss Off and Disgust, literally, every band on the ideological spectrum- the Godless Heathens know they had the votes to defeat the measure but were screwed over and ignored and humiliated and Godfearing Real America not at all fooled by the cosmetic repair to the platform.)
Priceless.........

3- Obama's limp speech, confirming the impression of inadequacy created by Bill's boffo performance and hinting at the job numbers to come....

4- the truly frighteningly GRIM job numbers that rushed in before the hangovers were even gone mocking the Democraps party.

damn. You couldn't make up stuff this good.......
Posted by *Hic!* on September 8, 2012 at 5:34 AM · Report this
50
This is really good, informative and interesting post i will like to say thanks and also request you to keep post this kind of information in your blog and increase peoples knowledge...!
Spirit United Kingdom Industry Report
Posted by rosstaylor2440 on February 9, 2013 at 12:36 AM · Report this

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