State turns to drink for money

It’s as predictable as a hangover: In hard economic times, governments reach for the hard stuff, jacking up liquor taxes and loosening “blue laws” to siphon money from the nation’s most ubiquitous vice.

Booze prices are on the rise from Kentucky to Oregon, and lawmakers in nine states have considered tossing their prohibition on Sunday liquor sales this year. On the federal level, a higher alcohol tax has been mentioned as a possible moneymaker for national health care reform.

But in Washington, officials are going a bit further. Staring down a massive budget deficit, the state Legislature has uncorked one of the country’s most aggressive attempts to capitalize on liquor sales.

The steps, rolled out over the next two years, will transform the state’s relatively straight-laced monopoly on bottled booze retail, including:

 • An expansion of liquor stores, either run by the state or licensed to contractors. The plan will add a new liquor store every 60 days starting this fall, for a total of 15 new locations.

 • New seasonal stores in shopping malls, focused on selling holiday gift packs of liquor.

 • Further erosion of a ban on liquor sales on Sundays and holidays. Most state stores will now be open on seven holidays, and nine more stores will join the previous 49 allowed to sell on Sunday.

 • More sales of state Lottery games, and the debut of liquor store gift cards, to be sold only in liquor stores. “You wouldn’t pick them up at Home Depot or anything,” Liquor Control Board spokesman Brian Smith said.

State officials hope to make about $16 million from the new projects.

But there’s bad news as well: Regulators have increased the profit “markup” imposed by the state, which adds costs on top of the sales and liquor taxes consumers already pay.

The surcharge is expected to raise about $80 million over two years, replacing money that lawmakers raided from a liquor fund to balance the state budget. It takes effect Aug. 1, adding about $3.70 to the price of a bottle of premium whiskey.

The national distillers’ lobby has angrily criticized the markup as a “stealth tax increase” on liquor, and warns that higher prices could cost jobs in the hospitality sector.

Criticism of the state’s new liquor plans is also coming from grocery stores, which must compete with state-run liquor stores on profitable sales of beer and wine.

Washington is one of 18 “control states,” which exercise broad powers over wholesale liquor distribution. Of those states, only eight also are involved in retail alcohol sales.

The stated reason for having the government so heavily tied up in the liquor business is to limit the supply of bottled booze, and keep prices high, to tamp down on the problems that can come with alcohol abuse.

But control states also can earn more money than those that simply tax and regulate private liquor transactions, meaning the state winds up depending on growing sales of a product it’s supposed to keep under control.

Regulators are always mindful of that balancing act, Smith said.

“What we want to be able to do is to make our products available to the general public,” Smith said. “We don’t want to flood the market by any means.”