D.C. group backs Washington state initiative to nix new state taxes on pop, candy

OLYMPIA — The Washington, D.C.-based American Beverage Association has thrown more than $1 million into a rushed campaign to end new state taxes on candy, soft drinks, bottled water and certain processed foods.

Initiative 1107 supporters have just two more weeks to collect the signatures of more than 241,000 registered voters to qualify the measure for the November ballot. They started gathering signatures last Friday; the deadline is July 2.

"That's an extremely tight time frame," acknowledged Robert Gara, the campaign spokesman, but he added, "We're extremely positive we'll be able to do that."

Initiative opponents, however, say the group's statements and website — www.stopgrocerytaxes.com — are trying to get signatures by misleading voters into thinking the state Legislature approved a broad-based tax on food.

Besides candy, pop and bottled water, the only foods covered by the new taxes are certain processed foods such as canned chili.

"The Legislature has not introduced a tax on food in Washington," said Sandeep Kaushik, a spokesman for Citizens to Protect Our Economic Future, which opposes I-1107. "This kind of deception is what happens when out-of-state interests are trying to protect their profits in our state."

The beverage association is fighting to end or prevent similar tax increases across the country, said Kevin Keane, a spokesman for the group.

In addition to Washington, Colorado has increased taxes on soft drinks, and at least 13 other states have considered doing so, according to the National Conference of State Legislatures.

"We're doing what we need to in order to stave off the taxes from passing or making changes if they do pass," Keane said.

Gara said the campaign here is using a combination of volunteers and paid workers to gather signatures.

"What we're worried about is these taxes set a dangerous precedent that politicians in Olympia can reach deep into the grocery carts of hardworking families across the state of Washington," he said.

The Legislature earlier this year approved taxes expected to bring in about $800 million in the current budget that runs through June 2011, and nearly $1.7 billion more in the next two-year budget. The package boosted taxes on a long list of items including cigarettes and beer, as well as increasing a business-and-occupation tax on certain services.

The money is being used to help balance the state budget, but the governor's office is still projecting a multibillion-dollar shortfall next year.

I-1107 could dig an even deeper hole in the budget by ending new taxes on candy, bottled water, carbonated beverages and certain processed foods. Those taxes are worth about $300 million over three years.

On June 1, the state began applying the sales tax to candy and bottled water. Next month, a 2-cent tax will be added to each 12 ounce container of pop.

The part of the initiative that deals with processed foods is partly why I-1107 backers feel they can claim the Legislature is taxing food.

It's complicated, but a 2005 state Supreme Court ruling broadened a preferential business-and-occupation tax rate for meatpackers in the state to apply to companies that use meat in their products, like canned chili.

Lawmakers this year decided to narrow the tax break again so it applied only to meatpackers. The only companies that would be hit by a tax increase are those that produce products containing meat mixed with other ingredients, said Mike Gowrylow, a spokesman for the state Department of Revenue.

It's a small part of the overall tax package and is expected to bring in about $12 million over three years.

Still, Gara said, "It's a tax on Washington business that produce processed foods and are bought in the grocery aisles in the state of Washington."

This dispute is similar to a recent court fight over how the initiative should appear on the ballot. I-1107 supporters wanted the statement of subject to say the measure would end tax increases "on certain food and beverages."

The state Attorney General's Office argued that that was misleading. "Our concern was the average voter would look at that and say this is about a sales tax on my groceries and think that it is much broader than it is," said Jeff Even, a state deputy solicitor general.

The judge agreed, he said, and the initiative wording was changed to "concerns reversing certain 2010 amendments to state tax laws."

Andrew Garber: 360-236-8266