Introduction

In November the people of Washington will vote on Initiative 1107. The measure would repeal four of the tax increases enacted earlier this year by the legislature and signed by Governor Gregoire. If passed in November, Initiative 1107 would repeal the following taxes:

• Excise tax on carbonated beverages (soda)
• Sales tax on bottled water
• Sales tax on candy
• Increased Business and Occupation (B&O) taxes for certain food processors (narrowing of a preferential rate)

The tax on carbonated beverages (soda) is two cents per twelve ounce serving, and is scheduled to expire on June 30, 2013. The sales tax on bottled water is scheduled to expire on June 30, 2013, but could be made permanent if Referendum 52 (approving bonds for energy efficient projects) passes this November.

Passage of these tax increases was facilitated when lawmakers voted in February to suspend the state’s two-third vote requirement to raise taxes. This allowed the taxes on food and beverages to be adopted by a simple majority vote in the legislature and then sent to the Governor.

The new taxes were adopted by a vote of 52-44 in the House and 25-21 in the Senate. These vote totals are far short of what would have been required had the two-thirds vote requirement remained in place.

If adopted by voters, Initiative 1107 would take effect on December 2, at which time these tax increases would be repealed. This paper reviews the way the legislature enacted the food and beverage tax increases, how the new taxes are being applied to different products, and the effect the initiative would have on taxpayer savings and the state budget if it is passed by voters.

Key Findings

1. I-1107 would repeal the new excise tax on carbonated beverages (soda), sales tax on bottled water, sales tax on candy, and increased B&O taxes for certain food processors.
2. The legislature voted on the 112-page tax bill (SB 6143) on the same day the final details were made available to the public, leaving no time for public comment or input.
3. State and local taxpayers would see an estimated $435 million in savings over the next five years if voters approve I-1107, and the state would see at least a $55 million reduction in available revenue for the current budget and a $218 million reduction for the 2011-13 budget.
4. Passage of I-1107 will signal the public does not want lawmakers to rely on new revenues to solve the state’s ongoing fiscal crisis.
5. The failure of I-1107 will indicate the public accepts the new level of taxation and the legislative budget priorities that go with it.

Washington Policy Center’s (WPC) Citizens’ Guide to Initiative 1107 can be found at: www.washingtonpolicy.org/publications/notes/citizens-guide-initiative-11….