An initiative that would repeal taxes on soft drinks and candy has both sides flinging claims like a middle school food fight.
The people behind Initiative 1107 say they want to stop the government from boosting taxes on a range of grocery items.
In a television ad, they say voters should “tell the politicians to stop taxing groceries.”
Those against the measure say it benefits mostly out-of-state mega-companies, and a D.C. lobbyist is bankrolling the initiative. They say the tax increases are on incidentals, not real food, and warn that its passage would lead to deep cuts that would hurt seniors and children.
Who is right?
Here are claims made by both sides and what we found when we looked into them.
The claim: Supporters of the initiative created a television commercial that says the Legislature raised taxes on “a wide range of grocery” items, including products containing meat, fruits and vegetables. That makes it sound as if the government is taxing all kinds of foods.
What we found: That’s a deceptive claim. The taxes cover candy, soda, gum and bottled water — that’s it. However, here’s where the “meats, fruits and vegetables” claim comes from. As part of the tax package, legislators also made clear if meat is added to a food, such as canned chili, manufacturers can no longer use a business tax break meant for meat packers, said Mike Gowrylow of the state Department of Revenue. That means that some food processors may have to pay the standard business tax instead of getting a break and they would, consequently, pay more taxes. This affects about 125 companies statewide. Similarly, food manufacturers that add fruit or vegetables to their products also will not be able to take advantage of business tax breaks meant for fruit and vegetable processors.
Claim: In the same commercial, supporters say that the state is putting “new taxes on food products” made by Washington companies but not on similar products made by competitors in other states.
What we found: That’s true, but the state can’t impose business taxes on any out-of-state businesses that don’t have a presence here, Gowrylow said. He also pointed out that competitors from other places have to pay taxes in their own state.
Claim: On the pro-initiative website stopgrocerytaxes.com, proponents say the tax also “imposes costly new red tape and bookkeeping requirements on every local grocery store in the state, and on Washington businesses that make food and beverage products.”
What we found: Some truth. The taxes require stores to figure out what products need to be taxed and which don’t. The state provides lists that companies can download to computerized cash registers, Gowrylow said. Smaller mom-and-pop stores might have to fuss around with remembering what gets taxed and what doesn’t. Whether that’s costly to businesses isn’t clear. He said that hasn’t been a problem in other states where similar measures were imposed.
Claim: The taxes are “absurd” because some products that are candy are not taxed, while other products such as energy bars are.
What we found: What’s considered candy by the state seems illogical. However, the definition of what counts as candy comes from a national organization that has tried to bring uniformity to tax rules. The Streamlined Sales Tax Governing Board defines candy as, “any preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the forms of bars, drops or pieces” — basically, sugary items that don’t include flour. That definition is why products most people think of as candy, such as Kit Kat candy bars, are not considered candy for purposes of the tax, while some energy bars are defined that way. For a searchable list of candy that is taxed, go to http://tinyurl.com/taxablecandy.
Claim: Those opposed to the initiative say on their website, www.voteno1107.com, that the taxes on soda and candy “narrowly prevented” cuts to children and seniors and these same services “will be back on the chopping block in January.”
What we found: The statement makes it sound as if the tax money is tied to specific programs. The money gathered from the taxes goes into the state’s general fund, Gowrylow said. The general fund pays for a host of programs. At the moment, there are no specific lists of items that would be cut if the initiative passed, said Karina Shagren, a spokeswoman for the governor’s office. However, she said “any loss of revenue would mean additional cuts” to the general fund, and some of the biggest spending items in that fund are education, human services and corrections. Thus, it’s probable that programs for seniors and children could be cut. It’s also possible the state could cut money elsewhere, such as prisons.
Claim: The people behind the campaign against 1107 also say the initiative is being almost entirely bankrolled by the American Beverage Association, a D.C.-based lobbyist for soda companies.
What we found: True. The people behind the initiative have raised more than $16.7 million, according to the state Public Disclosure Commission. The American Beverage Association contributed all but $385 of that to the campaign.
The group against the measure, Citizens to Protect Our Economic Future, has raised just under $400,000. Its biggest supporters are unions representing teachers and health care professionals.
About the tax and I-1107
Lawmakers had a $2.8 billion cavity in the budget to fill. They balanced the budget partly by passing an $800 million tax package that included adding a sales tax on candy, soda and bottled water.
The tax is about 2 cents per can of soda. Taxes on candy are intended to be permanent, while all the others are scheduled to expire July 1, 2013. The state expects it would bring in about $300 million in three years.
Initiative 1107 seeks to repeal those tax hikes. It also aims to cut state business taxes for some manufacturers of processed foods.
Debra Smith: 425-339-3197, dsmith@heraldnet.com
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