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September 22, 2011 at 6:07 PM

Does I-1183 add a 27% tax?

Posted by Bruce Ramsey

The ad war is on for Initiative 1183, to privatize the sale of liquor. The latest entry by the “no” side has the “yes” side claiming that it is false. The ad, here, shows Alice Dietz, owner of The Brits, a cafe in Longview. She says:

As a small restaurant owner, I looked into the facts of Initiative 1183, and I don’t like what I see. The big corporations behind 1183 say it increases funding for government programs. But they don’t pay for it out of their corporate profits. Instead, you and I pay with a brand-new 27 percent tax. In this economy, I’m just trying to keep my doors open for my employees and my customers. The last thing we need is higher taxes. I’m voting no on 1183.

The “yes” side has three objections to this. The first two don’t matter to me and the third does.

The first is that the “27 percent tax” under 1183 is a combination of fees on wholesalers and retailers. Legally, they are not taxes. So says Seattle attorney Mike Vaska of the Foster, Pepper firm. This is not just Vaska’s opinion, but is the official opinion of the state, which wrote the ballot title, and of a Thurston County Superior Court judge who settled the arguments about it.

I consult my dictionary and read:

FEE: A “payment asked or given for professional services, admission, licenses, tuition, etc.”

TAX “A compulsory payment, usually a percentage, levied on income, property value, sales price, etc., for the support of a government.’

It smells like a tax to me, but then, I'm quoting Webster’s New World Dictionary. The dictionary is not the law.

The second objection is the ad’s statement that “you and I pay.” Under 1183, the wholesalers and retailers pay.

But I think of this issue not in terms of law but of business. A charge levied on every wholesaler and every retailer will be passed on. The customer will pay. The ad is essentially right about that.

Where the ad is dishonest is implying that people are going to pay 27 percent more for a bottle of liquor than they pay now -- that the 27 percent is on top of what exists now. It's not. Now they are buying their liquor from State of Washington, which has such a giant markup that it makes a profit of 39 cents on a dollar of revenue. Costco Wholesale (the main sponsor of I-1183) makes one and two-thirds cents per dollar of revenue. The 39 cents and the one and a half cents is difference between a competitive market and a state monopoly.

Under 1183, there will be a 27 percent State of Washington "fee," which falls to a 22 percent tax after two years. Indirectly, you will pay it. And you will pay the Costco, or Safeway, or Trader Joe’s, markup.

What you will not pay is is the state's markup. You will not pay for the state's organization, the state's employees and their pensions.

Will liquor be cheaper? I don’t know. Initiative 1183 promises state and local governments more money. So liquor might not be cheaper under 1183. It might be cheaper only at some places—maybe at Costco but not at the neighborhood grocery. Nowhere will it sell as low as prices in California, Nevada or Arizona. But it won’t be 27 percent higher, either.

Therefore, whether it's "taxes" or "fees," the ad is dishonest.

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To "opie of mayberry:" When you write, "The state runs a 52% profit margin," you mean markup. That is not the same as a profit...  Posted on September 25, 2011 at 11:20 PM by Bruce Ramsey. Jump to comment
the state runs a 52% profit margin on current sales. There seems to be plenty of room in that margin to absorb a 27% fee or tax or what ever you...  Posted on September 25, 2011 at 6:29 PM by opie of mayberry. Jump to comment
Look at other states to see what happens when liquor is privatized. Their DUI rates are lower. If that happens here, it will hurt lawyer...  Posted on September 25, 2011 at 5:43 PM by freedom53. Jump to comment