By Dave Escalante / For The Herald
Trips to the grocery store seem to get more expensive every week.
I moved to Snohomish County in 1997 when my dad was stationed at Naval Station Everett. A lot has changed over those years while I’ve built a career in the regulated spirits and wine distribution industry, which has given me a chance to travel all over our state, especially the Puget Sound region.
No matter who you are or where you live, you’re worried about skyrocketing costs. So I’m hopeful that when the state Legislature and governor adopt a final budget, they include funding for a comprehensive study of alcohol taxation in our state, as outlined in Senate Bill 5368. The way that consumers pay taxes on alcohol in Washington is more than a decade old and modern consumer preferences mean that some consumers are punished with higher taxes depending on which product they choose at the store even when the alcohol content is identical.
Washington voters approved Initiative 1183 in 2011, ending our system of state-run liquor stores and creating a new private marketplace. Since then, our state’s tax system for alcohol is based on how a product is made and products are taxed at different rates depending on if the alcohol was produced through brewing, distillation or fermentation.
If you prefer a product made with beer (which now can often included canned cocktails or spiked seltzers), you are paying a tax of 26 cents a gallon. If you are buying a product made with spirits (either liquor or a canned cocktail or spiked seltzer), you are paying a tax of $26 to $34 a gallon. The tax rate for your purchase has nothing to do with the volume of alcohol in your drink, arguably one of the more important consumer considerations when making a choice.
The tax rate is also blind to the modern marketplace and popular products that didn’t really exist over a decade ago, such as canned cocktails. If you prefer a canned cocktail made with spirits, you will get quite the sticker shock when checking out compared to a canned cocktail made with beer (such as White Claw) even if the two products have identical alcohol by volume.
The evolving marketplace and out-of-date tax system is leading to new products with higher levels of alcohol that look very similar to spirits, but have a much lower tax rate and are also available where spirits are currently prohibited, since their alcohol contents are brewed rather than distilled. There currently is a widely available product under the Fireball brand that is 16 percent alcohol, but since it’s made from beer it’s only taxed 26 cents a gallon and can be purchased in stores smaller than 10,000 square feet — such as onvenience stores — where other high-alcohol-by-volume products are prohibited when made with spirits. This is a classic example of state law falling behind consumer demand and modern markets.
A comprehensive analysis of our tax system, commissioned by the Legislature and conducted by the Washington State Institute for Public Policy, would gather data on our state’s system and systems in other states to inform any potential reforms of the status quo. This analysis, already proposed in the state House and Senate, would promote transparency for consumers on the taxes we are all paying. It would also help evaluate if the public revenue goals for taxing alcohol are being achieved and if public health objectives are being met.
This analysis has bipartisan support and though it has been advanced by multiple legislative committees this year, the final decision sits with the budget-writers and governor. I hope they see it as a worthwhile investment to help make a data-driven decision on how our current alcohol tax code impacts consumers, small businesses and state coffers.
I’ve seen a lot of changes in my career. Small businesses have shuttered in face of growing competition from larger stores that are better equipped to weather Washington’s alcohol tax system.
One thing that hasn’t changed has been the work ethic of those in my industry. I didn’t know anything about spirits 25 years ago, but I did know how to work hard and treat people the right way. I think that the way we tax alcohol should have the same goals.
How can we respect consumer choice, be transparent on costs and make sure that the tax revenue goals for supporting critical public services are being met? A state analysis on our current system would help lawmakers answer those questions. They should adopt SB 5368 to authorize that work.
Dave Escalante lives in Arlington with his family and has worked in the regulated spirits and wine distribution industry for nearly 25 years.
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