The Washington State Liquor Control Board will meet Wednesday in Lacey to propose a $1.05-per-liter increase in the price of booze to replenish nearly $80 million the Legislature took from the board to balance the state budget.

Representatives of the liquor industry claim state lawmakers are forcing the Liquor Board to "raise taxes" because they couldn't come up with the two-thirds majority vote in the House and Senate to raise taxes themselves.

But Legislature is cleverly circumventing provisions of Initiative 960, which requires a public vote or a two-thirds vote to raise taxes, said David Wojnar, vice president of the Distilled Spirits Council of the United States.

Wojnar called it a "stealth tax."

"Legislators aren’t pulling the wool over anyone’s eyes here – this is a tax," said Wojnar said. "By forcing the agency to raise prices on liquor, state legislators have craftily avoided leaving their own fingerprints on what is essentially a major tax hike.

"This stealth move violates the spirit of I-960 which would have required a two-thirds vote by the Legislature to enact a liquor tax increase," he said.

Brian Smith, liquor board spokesman, said Tuesday that Liquor Board members are moving quickly to replace the money the Legislature tranferred from the liquor board's revolving fund. The board notified suppliers of the proposed increase, which would take effect Aug. 1.

The $1.05 per liter increase would raise $78.6 million if it remained in effect until June 30, 2011, the end of the 2009-11 budget cycle, he said.

The Legislature took $60 million to help balance the state budget. The remaining $18.6 million would have gone to local governments.

Rep. Kelli Linville, D-Bellingham, chairwoman of the House Ways and Means Committee, said the transfer from the liquor board account was necessary to balance the budget and help fill a $9 billion shortfall.

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"We didn't just pick on them," she said of the liquor board. "It was for two years and we're trying to figure out how to balance our budget for two years. The extent of the cuts that we were making, we had to have at least a two-year plan."

State budget-writers transferred hundreds of million of dollars from other accounts to balance the budget, she said. "I don't know what else we could have done," she said.

The liquor board is raising the price of liquor, not the excise tax, she said.

"The liquor board has the authority to raise retail prices," she said.

Here's the news release from the liquor industry.

STEALTH TAX ALERT:

WASHINGTON LEGISLATURE THREATENS HOSPITALITY INDUSTRY WITH STEALTH ALCOHOL TAX HIKE

Hidden Tax Will Cost 1,100 Hospitality Sector Jobs

OLYMPIA, WA – The Washington State Legislature’s budgetary “money-grab” from the State Liquor Control Board (WLCB) will tomorrow force the agency to raise liquor prices substantially – a move the Distilled Spirits Council called a “stealth tax” that will have consumers paying up to $2 more per bottle come August.

“Legislators aren’t pulling the wool over anyone’s eyes here – this is a tax,” said Council Vice President David Wojnar, noting that the Legislature took $80 million from the WLCB’s successful revolving fund – forcing the agency to propose a major price increase to shore up the difference. “By forcing the agency to raise prices on liquor, state legislators have craftily avoided leaving their own fingerprints on what is essentially a major tax hike. This stealth move violates the spirit of I-960 which would have required a two-thirds vote by the Legislature to enact a liquor tax increase.”

A recent economic analysis by Council Chief Economist David Ozgo showed that increasing the liquor excise tax by $1.15/liter, as proposed, will raise the state’s implied overall excise tax rate to $23.86/gallon – a rate double the control state average and more than 6 times higher than the average rate in states without state-run systems. According to the analysis, most bottle prices will increase by 5.6% or more. On a 1.75 liter bottle size, the size most popular with budget-conscious consumers, this would mean a $2 per bottle increase. The analysis also showed that the reduction in economic activity would destroy 1,100 hospitality sector jobs.

“When the hospitality industry is already struggling, now is the worst time to increase liquor prices,” said Wojnar, citing 1,600 state hospitality jobs lost in the last year due to the recession. “Policymakers need to understand that a tax on alcohol is a tax on the entire hospitality industry – negatively impacting restaurants, hotels, bars, nightclubs, liquor stores, and the thousands of men and women they employ.

Ben Jenkins
Communications Director
Distilled Spirits Council of the United States
1250 Eye Street NW, Washington, DC 20005, Suite 400