The Democrats’ tax package was poll-tested
Democrats in Olympia end up taxing Joe Six-Pack, since they couldn't find other taxes to raise that poll well or could survive Tim Eyman's initiatives.
Richmond Hill, Georgia
I had a pretty typical Northwest weekend. Bought a latte, contemplated how to spend my REI dividend, and served a local microbrew at a gathering of friends. In a few months, when the Democrats’ new tax hikes kick in, I won’t pay a penny more for those “discretionary purchases.” My Starbucks drink, REI fleece, and Fish Tale Ale will cost the same.
Not true if you’re the guy who stops off at the convenience store on a Friday night for a half-rack of Budweiser, a six-pack of Coke for the kids, a pack of cigarettes (tough habit to break), a pack of gum, and a couple of candy bars. That guy will easily spend $1.75 more in taxes, thanks to a tax package some call the "7-Eleven tax."
Have majority Democrats in Washington declared class warfare with the nickel-and-dime portion of their nearly $800 million tax package? Was that intentional? No. But they’ve certainly armed Republicans with a populist message for the blue-collar set just in time for campaign season.
The alternative would have been to make everyone pay via an across-the-board sales tax increase. That’s the approach Senate Democrats clung to until the bitter end. But bottom line: the sales tax polls poorly. That’s, at least in part, why House Democrats refused to go along with the Senate’s proposal for a temporary sales tax increase of between one-tenth and three-tenths of a penny. Speaker of the House Frank Chopp "really resisted doing that,” says House Majority Leader Lynn Kessler, D-Hoquiam.
Instead, Democrats, in the waning days of a 30-day special session, settled on a hodge-podge of taxes that individually poll better. Like the beer tax, which Kessler told TVW polled at 62 percent. Democrats tailored the tax to exempt micro-brews to protect in-state brewers.
Another key consideration, according to Rep. Hans Dunshee, D-Snohomish, was developing a menu of tax hikes that wouldn’t be overturned by citizen initiative. He notes extending the sales tax to bottled water and candy polled above 50 percent. “Our package was crafted with the November ballot in mind,” says Dunshee. “We always look at [the question]: Is it sustainable on the ballot?”
Since Democrats put “emergency clauses” on the taxes, they’re not vulnerable to a voter referendum, which takes fewer signatures to qualify. But that didn’t stop tax foe Tim Eyman last week from filing a slew of initiatives to overturn the taxes. Eyman says he’s testing public opinion to see which of the taxes create the most heartburn before he decides whether to mount a real tax-repeal signature-gathering effort.
The bigger threat, it would seem, is the one legislative Democrats themselves face at the polls this November. Kessler, who’s retiring for health reasons, doesn’t think the Democrats will lose their majorities, as happened in 1994. “There won’t be a sea-change,” Kessler predicts, adding in an obvious understatement: “But we’ll lose a few seats, I’m sure.”
The irony is swing district Democrats who voted “no” on the tax package — and there are several of them in both chambers — are the ones who are most likely to pay the price for the taxes that were raised.
As you would imagine, minority Republicans are as optimistic as they’ve been in years. Carefully playing the expectations game, they agree with Kessler that a GOP takeover of the legislature is unlikely. “I’m not predicting [winning the] majority,” says Kevin Carns, Executive Director of the House Republican Organizational Committee. “But we're going to make some pretty solid gains this year.”
Senate Republicans are more bullish. “People have talked about my November smile,” admits Senate Minority Leader Mike Hewitt, R-Walla Walla. “If [we don’t get] the majority, we’re anxious to be closer so we can start talking about fiscal responsibility.”
Hewitt’s already anticipating another several-billion-dollar budget shortfall in the next biennium. Republicans are eager to hit the campaign trail and hammer Democrats for raising taxes and for failing to provide a longer-term solution to the state’s fiscal crisis.
Like what you just read? Support high quality local journalism. Become a member of Crosscut today!
Twitter
Facebook
RSS Feeds
Comments:
Posted Mon, Apr 19, 8:04 a.m. Inappropriate
The bulk of the revenue generated by this tax-package stems from an increase in the B&O; tax on small business (est. $245mill), and the revival of a tax on out of state business (est. $154 mill). Half the the $800 million package represents increased business taxes--surely passed on to consumers. The "7-Eleven Tax" is a marketing ploy that creates a false perception about the substance of the actual taxing mechanisms in question. Of course, the author's habit of regurgitating what others say, rather than examine the particulars in question, merely enables a political discourse that amounts to sloganeering. The fact that "sin taxes" poll well is besides the point as this package is largely a Business Tax.
Posted Mon, Apr 19, 9:09 a.m. Inappropriate
FlyintheOintment, the B&O;, a tax on gross receipts instead of net profits, is regressive, and when applied to the small businesses you also mention, is especially onerous, as they (we) cannot as easily pass those costs on to consumers as larger businesses can.
Posted Mon, Apr 19, 9:14 a.m. Inappropriate
Which is to say, even if you're right about Austin (though it's my opinion you're not), his main points still stand.
Posted Mon, Apr 19, 11:26 a.m. Inappropriate
Lukoff, your opinion of Jenkins is not supported by the myriad of articles in which he merely offers contrasting quotes. Political analysis or marketing analysis? Is there a difference? Given the fact that the political process generates sub-optimal solutions to compounding problems, which matters more: perception or out-comes?
Democrats desire the public perception that this tax package is based on sin taxes. Jenkins obliges by perpetuating that view. His main point that "sin taxes" are more palatable to the public may stand, but it's besides the point given the nature of the tax-package.
I agree with you on the B&0 Tax; however, costs will be cut or passed on, regardless. Ease is relative. As a small-business, I recently increased my prices 20% in response to persistently rising costs. In effect, this eliminates those customers that tend to be marginally profitable (whether, reduced competition, higher prices, or lower quality, the effect is increased costs in some form). I have low overhead: I sub-contract, rather than employ; I rely on networking and word-of-mouth, rather than advertising; I operate on cash-flow, rather than credit. If I'm finding it necessary to raise costs, I'm certain less comfortably situated business will find it necessary, also.
Gregory Wade
Posted Mon, Apr 19, 2:47 p.m. Inappropriate
Lukoff, your point on the regressive nature occurred to me. I agree that small businesses struggle to pass on costs to consumers in the manner large business do; however, I don't share you view on the regressive/progressive nature of the taxes. I don't believe in the notion of a "fair" tax system--whether one exists, whether one could be implemented, or whether the pursuit is a worthwhile goal. I believe in the importance of a functional tax system.
Posted Mon, Apr 19, 2:58 p.m. Inappropriate
A real attraction of the B&O; increase is that when businesses (like Fly's) raise prices the customers are unlikely to blame State of Washington, Christine Gregoire or Frank Chopp. On the other hand, maybe Fly's customers are sophisticated enough to understand where the money is going. I hope so.
Posted Mon, Apr 19, 4:40 p.m. Inappropriate
My perception is that this tax-package is largely perceived in the manner Jenkins, and the Democratic party portray it--sin taxes. I've seen little mention of the increase in the B&0, or analysis of it's potential impact on small business. It does appear that income exemptions where included, arguing against Lukoff's "regressive" claim. I've also seen little analysis as to whether these projections are realistic or subject to diminishing returns--ensuring we lurch from budget crisis to budget crisis.
Posted Mon, Apr 19, 8:20 p.m. Inappropriate
Mr. Jenkins do you really believe wholesalers and distributors are not going to raise prices across the board, including your micro. Margins have to be made. Get back to us in July and let us know if you are paying more, I expect you will be.
Second point that no one is talking about is the incentive for the micro's to grow and invest in Washington State. If I am producing 60,000 barrels do I really want to invest only to be taxed when I produce 60,001?
Login or register to add your voice to the conversation.