OR, WA & VA on verge of liquor law shake-up

Oregon, Washington and Virginia Eye Liquor Reform
By Oregon Tax News,

In November, Washington voters will have the opportunity to vote on two initiatives regarding the privatization of liquor stores and revising laws concerning regulation, taxation and government revenues from the distribution and sale of spirits.  If passed, Initiatives 1100 and 1105 will close state liquor stores and authorize private parties to sell and distribute liquor.  Although the initiatives will maintain the liquor excise tax, liquor profits will go to private retailers.  In addition, Initiative 1100 will eliminate beer and wine price controls and bans against volume discounts.  Beer and wine retailers will also become eligible to add a liquor license and will have the opportunity to buy liquor directly from manufacturers.

Costco donated more than $1 million to the I-1100 campaign.  The wholesale giant hopes to sell liquor to increase store revenue.  On the other hand, Seattle’s Komo News reported that Washington’s governor, Chris Gregoire, is opposed to both measures because they will significantly reduce state revenue from liquor sales.  The governor fears these initiatives will add to the state’s $3 billion budget shortfall.  

Governor Bob McDonnell proposed to make Virginia the 33rd state to take a free market approach to liquor sales.  The governor plans to privatize the wholesale, distribution, and retail sale of liquor to provide consumers with better service and convenience.  However, the state will continue to regulate consumption, generate needed transportation revenue, and streamline costs.  Governor McDonnell’s plan includes the auction of 1,000 retail licenses for grocery stores, smaller establishments, convenience stores and pharmacies.  According to the governor’s administration staff, the privatization proposal will not increase taxes but restaurants will have an optional tax if they choose to buy liquor from wholesalers at discounted prices.

Opponents to Governor McDonnell’s proposal are concerned that it will decrease state revenue.  According to the Washington Post stated, “Virginia’s Alcoholic Beverage Control board deposited $248 million in liquor profits, as well as excise and sales taxes, into state coffers during fiscal 2009.”  The liquor profits are so high in Virginia because $13 of the retail price goes directly to the state.  Proponents argue that privatization creates a larger tax base to generate more tax revenue because it increases the number of stores that may sell liquor.  In addition, the governor’s administration officials forecast that selling new liquor licenses could bring in $300 million to $500 million to the state.

Finally, gubernatorial candidate Chris Dudley made public statements about privatizing liquor sales in Oregon.  He believes that privatization in Washington, could decrease Oregon’s revenue from liquor sales as Oregonians travel to Washington to find cheaper rates.  Although the Oregon Liquor Control Commission (OLCC) does not expect that privatization of liquor sales in Washington would take a significant chunk of Oregon’s overall liquor sales, it concedes that Oregonians may question the core functions of state government and liquor regulations.

Oregon’s regulation of liquor nets $172 million a year, which goes to the state general fund, which flows to cities, counties and mental health and alcohol services.  Opponents to Dudley’s privatization proposition fear that privatization will add to the current budget deficit.

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