Crack open an ice cold Dr. Pepper and unwrap a Reese’s Peanut Butter Cup. This November, Washington State will consider Initiative 1107 (I-1107), a ballot measure that would roll back several controversial tax hikes approved by the legislature this spring. Specifically, I-1107 would repeal a new tax on soda, the sales tax on bottled water and candy, and higher taxes on food processors. If approved, the repeal will take place on December 2, 2010.
All of these tax hikes were enacted as part of a budget deal to close a projected $2.8 billion budget deficit for the upcoming fiscal year. Unfortunately, the response to this situation was a lot of discussion and debate over “inevitable” tax increases, and very little discussion or a lot of lamenting about budget cuts. NTU sent a letter to the Washington State Legislature urging more spending restraint. Regrettably, lawmakers did not heed our advice. Although state lawmakers said they made $755 million in cuts to state programs, there were also nearly $800 million in tax increases to prevent further cuts, in addition to bonding.
But would further cuts have been all that devastating? By our calculations, reducing the state’s budget by $2.8 billion would have left the state with roughly $6 billion more than what was spent in the 2005 – 2007 biennium. Was Washington State all that bad back then? A more reasonable budget does not hurt a state’s economy, but actually keeps it strong by holding back the crushing burden of government and the need for punitive tax hikes like those on soda and candy that I-1107 now seeks to repeal.
The Washington Policy Center’s Jason Mercier has just released an analysis of I-1107 that is worth reading. Jason points out that if I-1107 is approved, Washingtonians could see $435 million in savings. He also highlights some of the issues with the tax hikes when they were enacted earlier this year. The tax hikes were approved with little transparency; in fact, the State Legislature voted on the tax package the same day final details were made available. The lack of transparency has contributed to errors in the tax design and application, and confusion as to who pays what. Under the candy tax, for example, a Reese’s Peanut Butter Cup is taxed, but a Kit Kat bar is not. Confusion not only increases the cost of the tax, but it lends to more revenue volatility and uncertainty. These are the last things Washington State needs in this economy.
A lot is at stake with I-1107. As Jason rightly points out, passage of I-1107 will mean that voters do not want to pay poorly-designed, punitive taxes, imposed with no public debate. Additionally, I think it means that voters want their legislators to engage in more reasonable budgeting to prevent huge deficits and the need for more tax hikes to feed the government’s appetite. Failure of I-1107 will mean that voters are fine with the status quo. I hope (and believe) Washingtonians will choose the former. Let’s drink and eat some candy to the passage of I-1107.