Shouldn't all playing fields be level by now? Liquor and e-cigs included

The Spokesman-ReviewMarch 10, 2014 

Warehouse workers haul liquor in this April 2012 file photo

LUI KIT WONG — The News Tribune

There is so much talk in legislative debates of the need to level the playing field that one wonders if an army of bulldozers should be dispatched to sporting facilities around the state.

Such leveling is almost always a major part of any call for tax breaks, whether it's for server farms or border-community retail stores. But the playing fields for alcohol sales are apparently the most cattywampus, judging from efforts to “tweak” Initiative 1183.

You remember I-1183, the initiative that was going to lower the price of hooch and make everyone happy by getting government out of the liquor business and letting the marketplace take control?

Except that the fine print in the initiative -- which very few people bothered to read despite the warnings from the ballot measure’s opponents -- made clear that the state coffers would be none the worse for losing the markup the state was pocketing on liquor. That meant more taxes and fees for new liquor businesses, and to paraphrase Ronald Reagan: “Businesses don’t pay taxes and government fees, people do.”

The state rather gleefully auctioned off the rights to licenses for its stores and allowed the folks who for years had sold booze under contract to the state in small towns first dibs on their licenses. Some of those contract liquor stores banked on keeping a bit of trade they’d always had, selling to local bars and restaurants at a wholesale rate when those establishments needed to restock in between deliveries from the state’s warehouse. When the brave new post I-1183 world dawned, those sales were hit with all the taxes any retail customer paid at any store.

If they had to pay retail, restaurants and bars were likely to shop at a supermarket or a big box store, where volume buying and selling tends to drive down the retail price. Last year, the Legislature agreed to drop the some of the taxes for contract store sales to restaurants and bars, to “level the playing field.”

This year, supermarkets and big box stores, along with some bars and restaurants, argued for the same deal. Legislators who supported this latest tweak said such an arrangement would – ahem – level the playing field. Apparently restaurateurs and barkeeps who poured their last shot of Jim Beam or Johnny Walker on the shelf some Friday night were having to run uphill to Safeway but downhill to a contract store. If the Safeway was a few blocks closer, why should they have to burn the extra calories?

One can easily imagine contract stores coming back next year with a complaint that their field once again needs leveling vis-à-vis the cheaper hooch at Costco, Total Wine and Safeway. Repeated scooping of the field may someday make it level, 100 feet below sea level.

More philosophical gymnastics are at play on tax policy for other things that some people think can be bad for you, as the Legislature considers levying taxes on e-cigarettes

The proposed tax on the nicotine-laced liquid that turns into inhalable vapor came out of the blocks at 95 percent. By most metrics that would be considered high, unless one knows that about half of the $8 or so that one plunks down for a pack of cigarettes, which e-cigs are designed to replace, goes to the state in taxes.

The e-cig tax proposal was amended down to 75 percent last week, but that didn’t much mollify passionate supporters of the product who swarmed to the hearings. “Vaping” as it is called, is a cleaner, safer, healthier alternative to cigarettes. Considering the state has spent decades trying to get people to stop smoking, and if this succeeds where nicotine patches and gum fail, the state should be cheering, not looking for ways to make a stack of cash, they argued.

Some e-cigarette stores would have to lay off employees to cover the added costs, and others along the borders might close entirely because of the unlevel playing field this would create with competitors in Oregon and Idaho.

Legislators picked up these arguments as the bill was debated on the House floor, and while the bill passed, it faces a tough fight in the Senate where the jobs argument carries more weight with the controlling coalition.

Similar arguments were made in an attempt to head off higher taxes for medical marijuana. Users of that substance also extolled its ability to provide relief to a wide range of problems that they said prescription drugs or standard therapies do not. Owners warned of the closure of dispensaries and the employees who would be thrown out of work if those proposals pass.

But will the free-market champions of e-cigarettes worry about unlevel playing fields for medical marijuana? Based on reactions from legislators at the many pot hearings this session, don’t bet on it.

The hobgoblin of consistency rarely haunts the minds of legislators.

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