As legislators reconvene this afternoon to take up a controversial $801 million slate of tax increases, Heidi Piper Schultz and 20 of her employees at Corwin Beverage Co. in Ridgefield will be knocking on doors in Olympia.
They’ll be trying to convince local Democrats not to support a proposed temporary tax on carbonated beverages of two cents per 12-ounce can — a key part of the tax package.
“We’re getting feedback that the people who represent our employees are being bullied into voting for this tax when they don’t agree with it,” Schultz said Friday.
Washington’s beverage industry is pulling out all the stops in an effort to derail the tax on wholesale soda pop sales. Hoping to head off similar proposals in other states, beverage lobbyists have bought full-page newspaper ads and TV spots, staged a rally on the steps of the Capitol, and hinted that their members are prepared to mount a petition drive to overturn the temporary tax if it becomes law.
The soda tax would raise an estimated $38 million between July 1, 2010, and June 30, 2013, to help plug a $2.8 billion budget deficit.
New taxes on retail sales of bottled water, gum, candy, cigarettes and mass-produced beer, and on professionals and service providers who currently don’t collect sales taxes on their work, also are expected to be part of the revenue mix.
Overall, the Legislature has settled on a plan to bridge the gap with $800 million in budget cuts, $800 million in tax increases, and the balance from emergency reserves, one-time fixes and federal funds. The latest budget cuts, announced Thursday by the Department of Social and Health Services, will eliminate 160 positions in the Medicaid program, which provides health services to the poor.
Tension builds
On Friday, Democratic leaders were polling their members to see if they have the 50 House votes and 25 Senate votes required to pass the revenue package. No Republicans are expected to support the tax measure.
With the 30-day special session about to expire, Rep. Jim Moeller said time is running out for Democrats to reach a budget and tax accord.
Gov. Chris Gregoire said Friday that Democratic lawmakers can either approve her “go-home” tax hikes or sit back and watch her slash state spending across the board.
“It’s time to fish or cut bait,” Moeller said. “We have until Tuesday at midnight. The governor has made it clear she won’t call us into special session again.” He said he expects passing the budget and tax package to take the full four days.
Among Clark County Democrats, Moeller, Sen. Craig Pridemore and Rep. Tim Probst, all of Vancouver, responded to calls from The Columbian asking how they planned to vote on the tax bill.
Moeller said he would likely support it; Probst said he would oppose it; and Pridemore said he remains undecided.
Probst has kept his promise not to support new taxes this year. “My current focus is trying to make sure we don’t lose sight of the fact that the economy is our No. 1 priority this year,” he said.
“I personally am ambivalent,” Pridemore said. “My support for a tax package was always contingent on funding the working families tax credit.” But he said he has not been able to find out whether the tax credit, which Pridemore originally sponsored, and which would provide small checks to the working poor, has survived the latest negotiations.
Of the specific taxes proposed, Pridemore said, “There are none of them that are appealing. But I also don’t support an all-cuts budget, so I am going to have to swallow hard on some things.”
Some House Democrats are reportedly refusing to support the tax measure because it does not include a tax on banks that was part of the final House revenue bill.
“What’s frustrating,” Pridemore said, “is there are so many of us who are willing to find common ground, but there are some members who aren’t willing to compromise at all.”
‘A punch to the gut’
For Schultz, the proposed soda tax hits close to home. Corwin Beverage, a fourth-generation company founded in 1941, employs 115 workers, many of them members of the Teamsters Union. The company holds an exclusive franchise to distribute Pepsi and Dr. Pepper products in Clark, Cowlitz, Skamania and Wahkiakum counties.
Schultz says the tax could cost Corwin $1.3 million a year and force her to eliminate many good-paying jobs — potentially even to close her doors.
“For every 1 percent increase in price, you see a 1 percent decrease in sales,” she said. “We are expecting a 10 to 30 percent loss in sales. That will impact jobs as well.”
Competition from Oregon will be a factor in the company’s survival, Schultz added.
“Anyone who is selling soft drinks in the state of Washington will have to pay the tax,” she said. “As a border community, we are threatened even more, because if our prices increase we will see more people going to Hayden Island, going to Costco at the airport. We fear small convenience store owners will go over there to save money. We sell to a lot of vending companies, and we anticipate they will go over to Oregon too. If they can save 25 cents per case, they will do that.”
Moeller heard Schultz’s concerns. Earlier this week he took them to Gregoire, who had proposed the soda tax as a way out of the legislative impasse.
“It hits our area particularly hard,” Moeller said. “I asked, ‘What about our bottlers? We are hitting them with the soda tax and also the bottled water tax.’ I told the governor, ‘You have to do something to protect Washington jobs.’”
Moeller said he was able to negotiate language in the revenue bill that will exempt all the state’s bottlers from paying the tax on their first $10 million in annual sales.
“Hopefully this will stay,” he said. Bottlers “aren’t pleased,” he conceded, “but I can think of no other way out of this. The question is getting 50 votes in the House and getting the governor’s signature.”
Schultz said Moeller’s changes to the bill “might save one or two jobs” at Corwin Beverage.
“But when the Clark County unemployment rate is over 14 percent, losing 10 more jobs is just not acceptable,” she said. “The past two years have been the worst for our company, but we have made it through without having to lay off anybody.”
“We really feel like we have been part of the solution by keeping people working and keeping them with their good health benefits. It really does feel like a punch to the gut.”
Exemption survives
There is some good news in the revenue package for Clark County retailers. A sales tax exemption on retail purchases for nonresidents will remain in effect, despite efforts in the House to do away with it.
“They didn’t have the votes in the Senate to repeal it,” Moeller said.
Vancouver retailers strongly opposed the repeal, saying they feared that Oregon residents would not cross the river to shop at their businesses if they had to pay the state sales tax on their purchases.
There’s also good news for Canadian-owned TransAlta, Washington’s only coal-fired electrical plant and its largest stationary source of mercury emissions and greenhouse gases.
The Senate budget repealed a $5 million annual tax break for TransAlta. But the House bill did not contain the repeal language, and Gregoire persuaded budget negotiators to keep the tax break in the interest of preserving jobs at the TransAlta plant.
Ethan Bergerson of the Sierra Club said his organization had proposed using the money saved by canceling the tax break to offer workforce development for clean energy projects, including programs to benefit displaced workers at TransAlta.
“In this economy, $5 million more could do a lot,” he said.
Kathie Durbin: 360-735-4542 or kathie.durbin@columbian.com.
