OLYMPIA – Washington 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.”
When Washington was in a major economic downturn in the early 1980s, the governor was a Republican and both houses 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 consulted with Spellman during this year’s tax discussions, and he said his biggest mistake was extending the sales tax to food, a move that was overturned at the ballot box. “That’s why I’ve said, ‘Let’s go for things that are discretionary,’ ” Gregoire said.
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 microbrew beer will be exempt from the new tax levy.
The service industry – a wide range of businesses from lawyers and accountants to barbers and musicians – will pay an extra 0.3 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. Changes in the business and occupation tax will affect the manufacture of canned meat, fruit and vegetable products.
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 fund everything from education programs to health care to senior programs.
“I believe in the people of the state of Washington,” she said. “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 the new taxes 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 staples 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,” Holmquist said. “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.’ ”
Tax activist 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 them with an income tax on people making more than $200,000 or couples making more than $400,000.
Gregoire said she would sign the income tax petition, welcome the debate over it if the proposal 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,” she said.
That prompted swift criticism from state Republican Party Chairman Luke Esser, who said Gregoire campaigned for re-election in 2008 by saying it wasn’t time to raise taxes and that she did not support a state income tax.
“Taxpayers should note that Gov. Gregoire never wants to have a good discussion and a debate over lowering taxes or keeping them constant but is always open to discussing tax increases,” Esser said in a news release.