Spin Control

Gregoire on tax plan: Don't go changin', rearrangin'

OLYMPIA – The Legislature returns Saturday with time running out in its special session and only two options on its unbalanced budget, Gov. Chris Gregoire said. Pass an array of taxes that covers everything from soda and bottled water to candy and cigarettes, or go home and have her cut the general fund budget by 20 percent.

A tax package, which has not been seen by the public because it was not final as of Friday afternoon, will be released along with a final spending plan sometime in the next four days. Democrats in both houses will have to get at least a simple majority to pass it, because Republicans remain united against any tax increase and want more cuts in wages, programs and state systems.

Based on comments by Gregoire, various legislative leaders and versions of the tax plan leaked to various news agencies or posted but later removed from a House Web site, the so-called go-home package collects an extra $800 million in taxes as part of a Democratic plan to close a $2.8 billion gap between projected revenues and scheduled expenses. The tax proposal:

• raises the tax on soda pop by the equivalent of about 2 cents a can or 50 cents a case at the wholesale level;
• places the state sales tax on bottled water, candy and gum;
• raises the tax on beer from large national breweries by 50 cents per gallon, or about a nickel for a 12 ounce can; microbreweries would be exempt;
• increases the business and occupation tax on most of the service industry from 1.5 percent to 1.8 percent of gross receipts;
• adds another $1 per pack to cigarettes, and similar tax increases to other tobacco products;
• changes systems for taxing out-of-state firms that do business in Washington.

Taxes on soda, bottled water, sweets, beer and the service industries would expire in mid 2013, although a future Legislature could change that.

Even though the public and most legislators haven’t seen the tax plan in writing, some of those affected are fighting the inclusion of their product or industry...

Friday morning, a coalition of about 50 people representing soda bottlers, grocers and convenience store owners came to Olympia to try to talk legislators out of the soda tax. Most legislators weren’t around, however, because their first floor session in more than a week was rescheduled Thursday evening, from Friday to 2 p.m. today.
Ron Bradford, of the Coca Cola Bottling operation in Spokane, said a slight increase in the sales tax, which was in earlier plans but recently dropped, is fairer: “Overall, I think the people of Washington would accept it if this was a tenth of a cent or two.”
Joe Gilliam, president of the Northwest Grocery Association, agreed a sales tax would be a fairer than the soda tax and many of the others, which he said put an unfair burden on certain consumers to pay for things the entire state receives through the general fund budget. “Why should soda drinkers be more responsible for schools or prisons?” Gilliam asked.
Any increase in cost results in a decrease in sales, which prompts layoffs, said Bob Slack, vice president of Coca Cola Bottling of Washington; the industry could cut jobs by 10 percent.
Gregoire said she doubted the dire predictions of layoffs. A temporary 2-cent per can hike is not an unfair request for a discretionary product like soda and “shouldn’t end up in anybody getting laid off,” she said.
Amending the plan isn’t an option because it has been put together in hopes of maximizing votes, Gregoire contended. “You take one piece out, you unravel it. You push another piece in, you unravel it.”
Democratic leaders may not know if they have the needed majority until each chamber votes on the tax plan and the budget, she said. If they don’t pass it before the session ends Tuesday, she won’t call them back for a second special session. Instead she’ll make plans for across-the-board cuts; if legislators can work up a new plan, they can bring it to her.
“Time’s up. They need to go home.”

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