OLYMPIA — Gov. Chris Gregoire signed two major tax increases Friday, insisting the state had no choice but to raise taxes on a wide range of businesses and consumer goods to protect key services.
She discounted any potential electoral backlash for Democrats from the tax increases in November, saying the budget isn’t a partisan issue.
“This is not about partisan politics. This is about tough times in the state of Washington,” Gregoire said.
When Washington was in a major economic downturn in the early 1980s, the governor was a Republican and both house of the Legislature were controlled by the GOP. They raised taxes, too, she said.
But voters gave the Legislature back to Democrats in the 1982 election, and defeated Gov. John Spellman in 1984.
“I’m not forgetting that,” Gregoire said. But she did consult with Spellman during the tax discussions, and he said the biggest mistake he made was extending the sales tax to food, a move which was overturned at the ballot box. “That’s why I’ve said let’s go for things that are discretionary.”
Between May 1 and July 1, taxes will go up on a wide range of goods and services.
Cigarettes will cost an extra $1 per pack. Candy, gum and bottled water will be subject to state and local sales taxes (they’re currently exempt as food). Soda pop will cost an extra 2 cents per 12 ounce can. Beer from major breweries will cost an extra 28 cents per six-pack, although microbrewed beer will be exempt from the new tax levy.
The service industry, which includes a wide range of businesses from lawyers and accountants to barbers and musicians, will pay an extra .3 percent on gross revenues. Out of state businesses will see new tax formulas, and companies that supply goods to in-state distributors will continue paying a tax that the state Supreme Court ruled last fall was improperly being levied against one major food supplier, DOT Foods.
Gregoire said Washington residents could avoid many of the consumption taxes by changing their habits — drinking tap water instead of bottled water, for example, or giving up smoking. Or they could continue buying those items and pay the increases, which would find everything from education programs to health care to senior programs: “I believe in the people of the state of Washington. I’m asking them to stand up.”
Republicans, who spent the 60-day regular session and the 30-day special session fighting any tax increases, called them job killers. Sen Janea Holmquist, R-Moses Lake, dubbed it the 7-11 Kwik-E-Mart tax package because so many of the items are the stables of convenience store sales.
“This package exempts things like expensive microbrews, but taxes those items that most impact working class and low-income Washingtonians like canned meat,” said Holmquist. “This is no way to balance a budget.”
Gregoire said Republicans who complained about taxes never proposed a budget that showed what services they would cut without raising taxes: “Everyone could easily say what they didn’t like. It’s easy to sit in the minority and say ‘No.’”
Initiative promoter Tim Eyman has filed a series of initiatives to give voters the chance to repeal most of the taxes if his organization collects enough signatures. Another group has filed an initiative to remove some of the current taxes and replace it with an income tax on people making more than $200,000 or couples making more than $400,000.
Gregoire said she would welcome the debate over an income tax if that makes it to the ballot, and may support it after studying it further.
“I have been opposed to an income tax. This is a different kind of income tax.”
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