Search & Distill: They’ve Got Us By the Booze

With the price of hooch about to go up, isn’t it time we consulted the open market?

On May 6, the Washington State Liquor Control Board voted to increase the markup on spirits in our state liquor stores from 39.2 to 51.9 percent, effective August 1 for a two-year period. With this revenue, the Liquor Board will try to replace approximately $80 million the legislature cut from its operating budget.The fine people of Washington should be pissed about needing to spend more to get pissed.A markup, or margin, is the percentage of cost used to determine retail price. Instead of a fee or a tax, raising the margin allows the Liquor Control Board to avoid adhering to the rules set forth by the 2007 passage of I-960, which requires every statewide tax measure to be placed on a ballot for voter approval. I-960 also requires fee increases to be passed by the legislature and approved by the governor. If the Liquor Board had gone with a previous plan to make up for the shortfall by asking for a $1.15 fee per liter, they'd have had to get legislative approval first.In an e-mail, WSLCD communications director Brian Smith writes "We decided to instead use a percentage increase because it would minimize the impact to those consumers and licensees purchasing value and popular (medium-priced) brands."In fairness, the Liquor Board has to contend with that $80 million budget shortfall—but they don't have to put it all on the consumer. Since the state has a monopoly on hard-liquor sales, they're doing a reach-around, increasing prices across the board instead of asking voters and elected officials for a tax or fee increase. None of the many wholesalers or spirit reps contacted for this story would go on record for this column—not surprising, since the Liquor Board could make things very difficult in future dealings with a brand or liquor company, which wouldn't have much recourse. The autonomy of the Liquor Control Board is exactly the problem with the markup decision; the only ways to appeal would be through a citizens' initiative or if the legislature was persuaded to intervene.We already pay too much for liquor in this state, and this is where my obnoxious "Where I'm from..." streak comes in handy. Right now, a 1.75-liter bottle of Stolichnaya vodka costs $46.95 in Washington, while it retails for $32.99 at Sam's Wine in Chicago. At the Liquor Board Class H price—what restaurants and bars pay—that same bottle runs $36.61, meaning a bar in our state still pays more than any average Joe in Illinois. I could play this game all day, with every major brand of spirit.Of premium-brand liquor sales possibly dipping, Smith says, "We don't know for sure. There is elasticity in alcohol sales. We built some elasticity in our model in case sales are more slack than expected." But every $10 increment in booze retail is a price barrier. And even though all bottles will increase the same percentage, the perception of that increase is the key—the more expensive the brand, the more noticeable the markup.According to a spirits representative who spoke on condition of anonymity, the Liquor Control Board recently gave the Distillery Representatives Association of Washington (DRAW) two weeks to come up with an alternative plan to the Liquor Board's increase. As of May 27, the Liquor Board had disregarded all DRAW's suggestions (DRAW is for the $1.15-per-liter fee). Personally, I think it's time DRAW funded a study to examine the tax-revenue potential of an open market for liquor in our

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