Will lawmakers pay for state tax increases?
JORDAN SCHRADER; Staff writer
A little more of gamblers’ losses at the poker tables of Iron Horse Casino are ending up in schools, prisons and the rest of state government.
That leaves a little less for the card room to pay its workers, owner Chris Kealy says. He threatens layoffs – or worse, closure.
“You get to a place where you can’t make money with something, you just get rid of it,” said Kealy, who should know: He shuttered his Everett location last year.
Minicasinos didn’t get attention in budget debates, but they’re paying more in taxes in the aftermath of state lawmakers’ work to close a $2.8 billion budget shortfall. Many lawyers, accountants, hairdressers and other service business are in the same boat, facing a surcharge in their Business and Occupation tax rates.
Cigarette smokers are paying more too. On Tuesday, they’ll be joined by candy eaters, gum chewers and those quenching their thirst with bottled water or a Bud Light. In small and large ways, many Washingtonians will feel the $800 million tax increase.
Whether there will also be a political price from the tax increases remains to be seen.
With an election looming, Democrats are telling voters back home that they had to raise taxes to prevent even deeper spending cuts than the billions of dollars they chopped over the past two years.
They hope to both keep their majorities in the House and the Senate and defeat any tax-repeal measures that make it to the November ballot.
TAXES PROTECT SERVICES
Gov. Chris Gregoire said some people seem to think Olympia is flush with money even as it raises taxes. She’s making plans for town hall meetings this summer or fall to correct that impression.
The meetings are intended not to influence fall voters, she said, but to prepare the public for next year’s budget process, when even more cuts or tax increases are expected to be needed.
If voters repeal the new taxes, the Democratic governor told reporters last week, it will mean fewer services such as all-day kindergarten, preschool for 3-year-olds and maternity care for poor mothers.
“When people say they don’t want to pay 2 cents (extra) for a can of pop, they need to know the consequences,” Gregoire said.
A new 2-cent excise tax on 12 ounces of soda pop is the last of the major taxes to take effect, on July 1. Like several of the other taxes, it is due to expire after three years.
COULD GO TO VOTERS
It could be the most politically dangerous. The bottling industry has filed initiatives to end the tax and other new food and drink taxes along with it.
If soda tax opponents can gather the signatures of 241,153 voters by July 2, they can put the taxes on the ballot, raising the possibility that voters will kick out a key leg of the lawmakers’ budget solution.
“I think it’s something we can win,” said Heidi Piper Schultz, co-owner of Corwin Beverage Co., a Pepsi bottler in Ridgefield.
Schultz said the 2-cent price increase would probably reduce her company’s sales of pop by 10 percent. She expects cuts in Corwin’s 115-member work force but hopes to make them through attrition, she said, not layoffs.
“I think there’s a lot of people who are asking, ‘Where do you draw the line of who you are picking on,’ basically,” Schultz said. “What makes it fair to make it harder for one group to do business than another?”
But Gregoire points to voters in Arizona, who this month surprised her and other observers by approving a 1-cent increase in the sales tax to avoid deep cuts.
Washington legislators chose a menu of taxes instead of a general tax increase, hoping it would prove more popular. Democrats will argue to voters that their taxes were modest – just 8 percent of the actions taken to balance the budget, according to the left-of-center Washington State Budget & Policy Center. Cuts, transfers and federal funding made up the rest.
Total tax revenues increased by 3.6 percent over the past two years, the center said, just below the national average of 3.8 percent. At least 33 states have increased taxes since the recession started, the center said.
As lawmakers campaign for re-election, they’ll find out just how much anger they’ve stirred up. At least one says he isn’t hearing much backlash over tax increases: Rep. Troy Kelley, a Tacoma Democrat who opposed his party’s taxes on key votes.
Kelley said Democrats who supported taxes can win over voters if they explain clearly the reasoning behind their votes. “If not,” he said, “they’re not coming back.”
ADJUSTING TO ‘SIN TAXES’
For some businesses and consumers, so-called “sin taxes” will change behavior.
Business shot up at BJ’s II Tobacco Co. on Pacific Highway in Fife as smokers stocked up on cigarettes before packs went up by a buck May 1, manager Joshua Turnipseed said.
Since then, it has slowed as smokers go through their supply or try to quit, Turnipseed said. But he’s been through tax hikes before and knows most will fail to kick the habit. He expects customers to slowly start returning.
Joe Mahoney said his restaurants, including the Sports Page in Auburn, pour brews from larger operations such as Budweiser along with small, local breweries such as Mac and Jack’s, Hale’s Ales and Georgetown Brewing.
Now he might ditch some major-label beers for more of the microbrews that legislators exempted from the new 28-cents-per-six-pack excise tax. But Mahoney said a bar almost can’t do without staples such as Bud Light and Miller Lite. Those brewers will see a tripling of their tax that will be passed on to restaurants, stores and consumers.
“We’re really making it difficult to stay in business,” he said.
Jordan Schrader: 360-786-1826
jordan.schrader@thenewstribune.com
blog.thenewstribune.com/politics
