Comment: Democrats’ tax plan aimed at ‘villain,’ hit consumers

By Anthony Anton and Tammie Hetrick / For The Herald

When Democratic lawmakers last December accidentally leaked their plans to increase taxes this legislative session, they said they needed to “identify the villain” – a villain they assured Washingtonians was the ultra-wealthy and some of “the biggest, most profitable corporations on the planet.”

Now that Democrats have passed their $9.4 billion tax increase in the state operating budget — the largest in state history — it’s clear who their villain is, but it’s not the ultra-wealthy or big business as advertised.

After all the Democrats’ talk about who needs to pay what they owe, it turns out they were talking about you.

At a time when Washingtonians cite the unaffordability of housing, gas, childcare, health care, and groceries as their top concern in poll after poll after poll, Democrats’ new taxes will increase the cost of housing, fuel, childcare, hospital care; and will add $100 million to the cost of Washingtonians’ food.

Making food more expensive is especially cruel: Essentials like food cannot be cut from household budgets.

That’s why, as representatives of local grocers and restaurant owners, we strongly urge Gov. Bob Ferguson to veto the Democrats’ tax increase on food, which will be devastating to lower-income households.

It represents a unfathomable abdication of concern for working families on the part of the governor’s Democratic colleagues.

How did this happen?

Democrats said they intended to “make our extremely bad, regressive tax system better than it is now,” using chart after chart to show how little Washington taxes wealthy individuals, broadcasting data from the Institute of Taxation and Economic Policy.

Yet when it came time to evaluate who would bear the burden of their tax proposals — those at the top or the bottom of the income scale — Democrats quickly turned a deaf ear to their friends at ITEP. A recent post reminded Democrats not to “settle for a more regressive revenue raiser,” warning that, with unwise choices, “the state risks backsliding … and moving further away from a tax system designed with equity and sustainability in mind.”

So what were Democrats’ tax equity ideas?

Achieving tax fairness by taxing wealth greater than $50 million? Democrats abandoned that idea.

Achieving tax fairness by adding a payroll tax on income for employees at large companies who earn more than $176,100? They abandoned that idea, too.

Both ideas were rejected after an intense lobbying campaign on the part of Washington’s corporate leaders, including from Amazon, WaFd Bank, Weyerhaeuser, and dozens more. Microsoft, leading the way, even pledged $1 million to defeat a payroll tax at the ballot.

Democrats then said they could achieve tax fairness by raising the B&O tax on businesses large and small; including more than doubling the tax on business with revenues over $250 million per year.

ITEP called this idea “fundamentally different from a tax fairness perspective” from the payroll tax proposal, which would only impact the top 20 percent of income earners. The B&O tax proposal would burden the bottom 80 percent of income earners. Democrats chose this one.

Now (paying close attention to the corporations mentioned above), Democrats did create some exemptions in their plan. These include computing, financial services, and timber; as well as airplane sales and the sale of oil. Democrats declined to clarify their rationale for these exemptions.

But, for the very same reasons cited by ITEP — namely, that the B&O tax is “a sales tax by another name” — we urged Democrats to exempt food wholesalers and distributors, too, offering amendments on five separate occasions. Democrats rejected them.

Restaurants and independent grocers play a vital role in ensuring access to fresh food for Washington’s communities. But we cannot pledge $1 million to beat this tax increase at the ballot.

When our members’ suppliers’ costs go up, our members’ costs go up, and they simply don’t have the margins to absorb these costs themselves. The average restaurant in Washington operates on a 1.5 percent margin, while the average independent grocer operates on a 1.1 percent margin. Washington’s menu prices are 12 percent higher than the national average. Our grocery costs are the fourth highest in the nation. Democrats’ tax increase on our industries represents one-third of the average restaurant’s margin and nearly half of the average independent grocer’s margin.

This is neither equitable nor sustainable.

Lawmakers missed their chance this year to rein in runaway spending, choosing instead to add to out-of-control costs already overburdening Washington families. Yet it’s not too late to undo their most unconscionable decision of all making food more expensive for Washingtonians.

Gov. Ferguson, please act.

Anthony Anton is President & CEO of the Washington Hospitality Association. Tammie Hetrick is President & CEO of the Washington Food Industry Association. This commentary originally appeared in The Spokesman Review.