Judge tosses liquor tax
OLYMPIA – State lawmakers went too far last year when they approved nearly $85 million in new taxes on liquor and extended warranties, a Snohomish County judge has ruled.
Those taxes are invalid, Judge James Allendoerfer said Monday, unless Washingtonians approve them in a statewide vote.
The news, however, wasn’t as good for smokers. The judge let stand last year’s 60-cents-a-pack increase in the state cigarette tax, most of which goes into a special state fund for education.
In his ruling, Allendoerfer said lawmakers’ 2005-07 budget exceeded the state spending cap by nearly $70 million. So he invalidated two sections of a tax law, killing the new liquor and extended warranty taxes.
Over the two years, Department of Revenue spokesman Mike Gowrylow said, the state anticipated $37.4 million from the new warranty tax and $47.2 million more from the $1.33-per-liter liquor tax increase.
Drinkers shouldn’t look for a discount just yet, though. Allendoerfer stayed his ruling while state lawyers appeal directly to the state Supreme Court.
“The point of the stay is for the state to continue to collect the tax,” said Greg Lane, a spokesman for Attorney General Rob McKenna. Lane said state lawyers are hoping that the high court will hear the case this fall.
The lawsuit revolves around Initiative 601, a ballot measure that in 1993 created a cap on state spending. To spend more than the cap, lawmakers would have to put the matter on the ballot and ask voters to approve it. Since the state exceeded the spending cap by about $70 million, the judge stripped away the two taxes, which total about $85 million.
“To us, you will never have a sustainable budget if you don’t have some sort of limit. If you’re spending other people’s money, there’s no incentive to be fiscally responsible,” said Jason Mercier, senior budget analyst for the Evergreen Freedom Foundation. The foundation is one of the plaintiffs in the case, along with farm, real estate, small-business and builder’s groups.
In a March oral ruling in the same case, Allendoerfer said that lawmakers “exploited a loophole” in the law to boost the spending limit wrongly by $250 million in 2005, then approved a budget that easily fell under that limit. Result: No public vote on the new taxes was necessary. He cited e-mails by legislative staffers, including one that described the spending cap as “very leaky.”
Over the years, both Republican and Democratic budget writers shifted funds and found other ways to skirt the spending cap without triggering a statewide vote. The alternative, lawmakers argued year after year, was to put critical state services at risk of brutal budget cuts.
Regardless of how this case ends, some of the loopholes that the judge criticized were closed this spring, when state lawmakers approved changes in the spending cap.
“I congratulate the Legislature for tightening up I-601 for all future years,” Allendoerfer said in March.