Liquor in grocery stores part II

To read our first post on Initiative 1183, click here.

Even after June 1, 2012, the state will still collect revenue from the sale of each bottle of liquor through a liquor tax. This liquor tax is considered one of the state’s excise taxes. (Read past posts about other excise taxes for fuel and tobacco here.) The state law pertaining to the collection of liquor tax can be found in RCW 82.08.150. In 2011, The Washington State Liquor Control Board (WSLCB) reported that liquor taxes accounted for more than $425 million in revenue that went to the state and local governments for services. The WSLCB produces a report that shows how each county distributes your liquor dollars, click hereto check out how your county benefits. Thurston County received $2,193,132 from liquor tax last year alone.

So starting June 1^st, you’ll be able to walk into Costco and pickup your favorite bottle of spirits right? Maybe not. Like most initiatives in this state, implementation of them becomes extremely complicated. The Washington State Supreme Court heard arguments last week that, if ruled in favor of, would make Initiative 1183 unconstitutional. You can view the hearing here.

The group bringing up the lawsuit is the Washington Association for Substance Abuse and Violence Prevention, a Washington non-profit corporation. The claim of illegality is that Initiative 1183 dealt with more than one subject. Washington’s Constitution states in Article II, Sec. 19 that, “no bill shall embrace more than one subject, and that shall be expressed in the title.” The Association for Substance Abuse and Violence Prevention claims that, “I-1183 exploited the initiative process to serve the special interests of large retailers such as Costco, its biggest financial supporter. Upholding I-1183 would compromise the integrity of future initiatives and eviscerate the salutary purpose of Article II, [sect.] 19.”

The plaintiff also believes that Costco and the backers of I-1183 purposely misled the voters by disguising new taxes as fees, thus distracting citizens who would perhaps not have voted for the initiative if it were a “tax.” The state insists that there are taxes involved with I-1183, but no new taxes.

The hope is that the court will rule on the lawsuit by June 1, 2012—the same day Costco (and others) will begin selling liquor. Stay tuned to TVW and the State Supreme Court for the final ruling.

What exactly is a tax loop hole anyway?

With so much heated rhetoric surrounding loopholes and the impact that they might be having on our tax code, it would be useful to spend some time getting at the heart of what a loophole, exemption, tax giveaway, or whatever you want to call it is.  For my purpose, I call it an exemption. However, a clear understanding in this department might make for more informed debate about the future of exemptions in Washington State. 

To date, there are 640 exemptions on the books in Washington.  Of those, 452 would likely increase revenue collections for core public programs if eliminated.  These exemptions can be found throughout the Revised Code of Washington (RCW).  The majority can be found in Title 82 and Title 84 of the RCW. 

Washington’s tax code has become riddled with exemptions.  So much so that in order to keep track of these exemptions and their complexity a full report must be written every 4 years by the state’s Department of Revenue detailing the presence of exemptions in our tax code.

These exemptions stand as a testament to our state’s changing culture and economy.  For example, RCW 84.39.010 provides for a property tax exemption for widows and widowers of U.S. Veterans. Another example is RCW 82.48.100, which provides an excise exemption for aircraft under specific circumstances. The list continues to a sum of 640 exemptions--452 of which would generate revenue if eliminated. 

After spending time with the list of exemptions, it becomes clear that this list is indicative of communal priorities.  Behind each of these exemptions, there was an influential voice that saw value in adding a specific exemption to our tax code.  A cynic would argue that these exemptions are the legacy of effective lobbying and special interest groups that cater to big business in the state.  An optimist would argue that these exemptions reflect the majority will of the tax paying public and were established through careful conversation and exploration.  Regardless of your perspective, it is hard to ignore the implicit values behind each of the 640 exemptions.

The property tax exemption for widowed spouses of veterans is a good reflection of a community that looks to honor and protect those that served.  The aircraft exemption is indicative of a set of priorities that includes the importance of business and ensuring that our state retains its competitive edge.  

Exemptions and their impact on our states revenue collections have battled with government efficiency for the center stage spot light during this recession in Washington State.  The exemptions debate has played out in the legislature, the courts, and the public through the initiative process.  Before entering into a tax reform discussion, background orientation will not only better inform debate, but may illuminate avenues for coping with future economic downturns.