Tax increases are coming soon to a merchant's shop or service business near you in Washington.
Gov. Chris Gregoire signed a series of tax and other revenue bills into law Friday that will raise or shift about $794 million to state general fund coffers.
Included are about $591 million of what Gregoire’s aides consider new taxes – new levies on sales of cigarettes, mass-market beers, candy, bottled water, soda pop, and a vast array of service businesses including law offices, real estate offices, hair salons and accountant firms.
“I couldn’t look myself in the mirror and take the kind of Draconian cuts that would have been called for without revenue,” Gregoire said. She noted that her December all-cuts budget wiped out need grants for college students, erased levy aid to tax-poor school districts, eliminated the Basic Health Plan and ended many services for the elderly.
State Republican Party chairman Luke Esser criticized Gregoire, a second-term Democrat, for breaking campaign pledges – including her statement Friday that she will sign an income tax initiative and might vote for it.
“A state reeling from high unemployment and a lingering recession must now endure more than $800 million in new tax increases by the Democrats,” he said in a statement. “I am proud to say that not one Republican member of the State Legislature voted for any of these tax increases, for which Democrats bear the entire responsibility.”
The surcharge on services takes effect May 1, and many of the taxes are temporary, expiring after three years. But some might be challenged through citizen initiatives.
Initiative promoter Tim Eyman is exploring tax-repeal moves. And the Washington Beverage Association is considering “options” that might include an initiative, said Tim Martin, an Elma bottler of soda pop and the president of the association.
Brian Charneski of L&E Bottling Co. Inc. in Tumwater said the two-cent tax per 12 ounces of soda pop could cut his business by 30 percent and cause layoffs. Charneski said his company already faces tough competition from big chains that do business with out-of-state bottlers or sell house brands that can have a competitive price advantage to the Pepsi products he distributes.
House Speaker Frank Chopp, D-Seattle, asked Gregoire after the special legislative session ended April 13 to veto the soda tax. That is because a $10 million exemption in the bill for bottlers is written in a way that won’t help bottlers such as L&E or Harbor Pacific, as intended. Democratic Rep. Brendan Williams of Olympia also asked for a veto.
But Gregoire signed the tax bills into law as written. She said the soda tax, which is expected to raise about $33 million over the next year, was part of a complicated “go-home” political agreement that ended the Legislature’s special session.
The governor defended herself against the GOP’s complaint, saying no Republicans ever said what they would cut to bridge the entire $2.8 billion budget shortfall.
“It’s easy to sit out … and be a Republican and say ‘no.’ It’s another to be in the middle of the game and actually do what needs to be done,” she said.
Business interests are worried by the tax burden, and David Schaffert of the Thurston Chamber said the business-occupations surcharge hits the “heavy, service-business community in Thurston County.”
The tax package won praise from human services lobbyist Nick Federici, who joined a throng of activists who posed next to the governor for photos after she signed House Bill 2493, raising tobacco taxes, and Senate Bill 6143, raising a menu of other taxes. Federici said many people had faced not just cuts in services but outright elimination of them.
The only lawmaker to join Gregoire when she signed was Rep. Ross Hunter, the House Democrats’ tax architect from Medina.
“No one likes raising taxes,” Hunter later pointed out with an air of understatement.