Budget fix in court of public opinion

Taxes: Plan could end up on ballot in November

April 9, 2010 


    Here are some of the proposed tax changes in an outline House Democrats posted to their blog, then removed, on Thursday. It’s a draft document and subject to change before a final deal is reached. The plan includes:

     • Increase business taxes on most service businesses – such as lawyers and accountants – from the current 1.5 percent to 1.8 percent. The increase would last three years and a tax credit for small businesses would double. Raises $246 million.

     • End a tax exemption for certain out-of-state businesses with sales in Washington. Raises $154 million.

     • Increase tobacco taxes, including $1 per pack of cigarettes. Raises $101 million.

     • Triple the beer tax, adding about 28 cents to cost of a six-pack. The increase would last three years and microbrews would be exempt. Raises $58 million.

     • Increase tax on soda pop by 2 cents per 12-ounces of pop, also for three years. Smaller bottlers would be exempt. Raises $38 million.

     • Apply sales tax to bottled water. Raises $35 million.

     • Apply sales tax to candy and gum, with a tax credit for companies based on jobs. Raises $29 million.

If majority Democrats in the Legislature raise taxes on beer drinkers, gum chewers, smokers and soda-pop lovers, they will be hoping it won't leave a bad taste in every voter's mouth.

Supporters and opponents of the targeted taxes are taking their case to the public. Their immediate goal is to convince lawmakers, but in the background is a chance for a second round at the ballot box.

At issue is an $800 million tax package that emerged this week as a potential deal to get legislators out of Olympia. Democratic leaders were explaining it to their members and counting votes Thursday, but had not publicly released details.

By abandoning an across-the-board sales-tax increase in favor of tapping selected businesses and consumers for revenue, Democrats could invite more opposition from business interests, but less notice from the public.

“They’re picking on smaller groups of people to pay more taxes,” said Tim Martin, president of the Washington Beverage Association and general manager of Harbor Pacific Bottling Co. in Elma. “They’re kind of dividing and conquering, hoping most people will say, ‘Well, I don’t chew gum.’ ”

The beverage-industry group aired advertisements on the radio during Wednesday’s Mariners game and in Thursday’s newspapers slamming a proposed tax on soft drinks. More ads are on the way, while on the other side, the Rebuilding our Economic Future Coalition planned to start radio spots today praising proposals to tax soda pop and major-label beer.

They are hoping people will call their lawmakers. But voters could end up deciding themselves.

Rep. Christopher Hurst, an Enumclaw Democrat who opposes the tax proposal as too large, says his “worst fear” is that voters would repeal the plan and deepen the budget crisis.

“I think if you put it on the ballot, it’ll get booted out,” Hurst said.

The taxes may take effect immediately, but if opponents can gather signatures of just over 241,000 registered voters by July 2, according to Secretary of State Sam Reed’s office, they can put all or part of the package on the ballot for rollback.

“There’s talk of that. We would have to weigh the benefits,” said Joe Gilliam, president of the Northwest Grocery Association, which opposes many of the tax proposals. “It’s an expensive proposition in this economy.”

Predictions differ on whether an initiative might seek to repeal individual taxes or the whole package. Gilliam said industries would be more likely to band together.

As far back as a February rally that brought supporters such as union members and college students to the Capitol, the pro-revenue coalition has told its members they would need to convince voters after convincing legislators.

“We’ve understood from the outset that there was a possibility that we would have to defend any potential revenue increase on the ballot,” coalition spokesman Sandeep Kaushik said Thursday.

The group has bought ad space in newspapers and on the airwaves to counter the message of what Kaushik calls “well-funded corporate special interest lobbies.”

“We don’t have the kind of resources that they do at their disposal,” he said, “but we’re going to make sure that legislators and the public understand that this is a good compromise proposal that’s going to make a difference as far as protecting core services.”

Martin said the beverage association is trying to “educate the consumer” and didn’t rule out an initiative campaign.

While small bottlers like his might be exempt under the latest soda-pop proposal, he said, it would affect his sales by forcing statewide grocery chains to raise their prices on the Pepsi products his company sells. A larger bottler in Ridgefield that is not exempt would face an extra $1.3 million tax bill, he added.

“As an association, we haven’t come together to decide what our next steps would be,” Martin said, “but as you can imagine, a tax of this significance, anything and everything’s on the table.”

Jordan Schrader: 360-786-1826

jordan.schrader @thenewstribune.com


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