1. I-1053: Concerning tax and fee increases imposed by state government. Passed.
2. I-1082: Concerning industrial insurance. Failed.
3. I-1098: Concerning establishing a state income tax and reducing other taxes. Failed.
4. I-1100: Concerning liquor (beer, wine and spirits). Failed.
5. I-1105: Concerning liquor (beer, wine and spirits). Failed.
6. I-1107: Concerns reversing certain 2010 amendments to state tax laws. Passed.
7. Referendum Bill 52: concerns the state issuing general obligation bonds for education. Failed
8. Engrossed Substitute House Joint Resolution 4220 : would authorize courts to deny bail for offenses punishable by the possibility of life in prison. Passed.
9. Senate Joint Resolution 8225 : concerns the limit on the state debt. Passed.

Results - 2010 - Initiatives 1053, 1082, 1098

Results - 2010 - Initiatives 1100, 1105, 1107

Results - 2010 - Referenda - 52, 4220, 8225

The opposing campaign, VoteNo1082.com, points out that certain text in the initiative would allow the licensed rating organization (LRO) to pre-emptively issue manual rates before the Commissioner approves them.  The LRO is delegated this responsibility, by the Commissioner (by law), and it is composed of a representative from every L&I insurer.

The campaign for the initiative, SaveOurJobsWA.com, rebuts with this statement (emphasis in original):

All of the laws governing the amount and provision of workers’ comp benefits are set in statute by the Legislature and all workers’ comp insurers must follow them.  According to the Office of Insurance Commissioner, who I-1082 gives regulatory authority over approving and licensing private insurers, they “will be subject to the regulatory requirements of the state insurance code, involving admission, financial, solvency and market analysis oversight,” they “will be subject to the unfair claims practices rules and statutes,” the OIC will have authority to approve or deny variations from rates filed by an independent ratings bureau, and “consumers who disagree with claims decisions made by private insurers will be able to file complaints with the OIC.

The oversight of insurers provided by I-1082 is actually stronger than current law. The Industrial Insurance program at the Department of Labor & Industries is not subject to consumer protection laws, the Insurance Fair Conduct Act or other laws commonly used to govern insurance companies.  I-1082 corrects this and provides greater protection for small businesses and injured workers.

If we assume the best, the LRO and Commissioner will work closely to ensure that rates and other necessary regulations are handled through open and public discourse.  If we assume the worst, insurance companies will not need approval to enforce new rates.  I assume that if the commissioner were to veto a suggested rate adjustment, the insurer(s) would have to roll back rates to those approved previously.

As far as I can tell, there is some initiative text that supports oversight from the State Insurance Commissioner, but the vagueness of the initiative could lead to varying interpretation, stalling techniques, and a potentially biased ratings organization.  Additionally, there are many concerns regarding a lack of regulation because Washington State has been the sole arbiter of coverage and has therefore not needed to manage the market externally.

I think that more clearly defined rules for government oversight of this newly created commodity market would ease voter concerns, but only vague defenses have been issued thus far.

Learn more about I-1082.

In a 30-second commercial, the Vote Yes on 1098 committee claims that the initiative “cannot be changed without a vote of the people.” This claim is false.

Yes On 1098 YouTube Clip

The legislature can change initiatives

On February 25, 2010, Secretary of State Sam Reed’s office confirmed that the Washington legislature can amend initiatives because voters gave the legislature that power in 1952 when they amended the constitution (emphasis per original):

[I]nitiatives have been repealed or suspended ever since the process was created nearly 100 years ago.  The first successful initiative, Prohibition, was later repealed.  A review by the state Elections Division showed that since 1952, when voters amended the constitution to make it easier for lawmakers to amend voter-approved initiatives, at least 30 have been changed or suspended.

Before the constitutional amendment of 1952, lawmakers couldn’t touch a voter-approved initiative for the first two years after the vote, but then could change or repeal by a simple majority.  The change, adopted by a large majority, said initiatives can be changed, repealed or suspended by a two-thirds vote of both houses during the first two years after passage, and simple majority after that.

Thus, with a two-thirds vote of both houses, the legislature could amend the initiative during its first biennium. However, mustering a two-thirds vote is a procedural challenge, one that is favored by supporters of I-1053 as a way to curb taxes. That said, two years later, with a simple majority vote, the Legislature could modify the initiative, per the state constitution.

To counter that reality, Initiative 1098 supporters, who include William H. Gates Sr. and Nicolas “Nick” Hanauer, a partner at venture-capital firm Second Avenue Partners, pledged in a full-page ad in the Seattle Times that if “the Legislature attempts to broaden the income tax without a public vote, we will write, file and collect signatures for a ballot measure to ensure that the people have the final say on any change.”

Learn more about I-1098.

Several organizations have researched the impact that significant taxes on sugar-sweetened beverages (SSBs) might have on obesity rates among children and adolescents, with the goal of reducing consumption (pdf).

Research has shown that relatively large increases in taxes on cigarettes and other tobacco products are the single most effective policy approach to reducing tobacco use….Emerging studies suggest that small taxes on SSBs are unlikely to affect obesity rates…

Small taxes, in other words, do not lead to a significant change in behavior. What is the current tax rate on beverages in Washington — is it relatively small or large?

From the state Department of Revenue (emphasis in original):

The carbonated beverage tax is imposed on the sale of carbonated beverages at wholesale or retail in Washington.  The tax does not apply to successive sales of previously taxed carbonated beverages. This tax is effective July 1, 2010 – June 30, 2013.

The rate is $.02 per 12 ounces of carbonated beverages.

This is not a tax imposed on the consumer; it is imposed on distributors and retailers (pdf). This week at Fred Meyer, Coca-Cola is on sale for $5.50 for a 12-pack of 12-ounce cans. Thus the excise tax on this sale item accounts for $0.24 or 4.4 percent of the total retail price. Conversely, a 12-ounce soda from a vending machine costs $1.00 – $1.50, with an effective tax rate of 2 percent or less.

Is this a significant, that is large, tax rate?

First, the excise tax rate appears to be less than the national average sales tax on soft drinks. As of January 1, 2009, 33 states had a soft drink sales tax; the average rate was 5.2 percent (pdf).

Second, there is no rational comparison between this excise tax and that on cigarettes. The excise tax on a pack (not a carton, a pack) of cigarettes in Washington is $3.025 (pdf). Clearly the beverage tax does not approach the rate needed to significantly curtail consumption (and thus sales).

Nevertheless, how might this beverage tax hurt Washington farmers and ranchers?

The short answer is that will have almost no impact on Washington state farmers and ranchers because we aren’t a sugar beet powerhouse. A 2009 Washington State University report (pdf) characterizes the state sugar beet industry as “small” – Washington produces only 0.25 percent of the nation’s sugar beets. And a WSU flyer (pdf) reported that in 1997 sugar beet production employed 300-400 seasonal laborers each year. No big impact here.

Thus there appears to be no evidence for the Pro-1107 claim that the carbonated beverage tax will hurt food makers or farmers or ranchers.

Learn more about I-1107.

In 1967, lawmakers approved a lower B&O tax rate for meatpackers, who market perishable meats. Somewhere along the line, other companies that use meat in their products — such as canned chili — sought to claim the same lower tax rate, and in 2005 the state Supreme Court ruled that they could, based on the language of the existing law.

The legislature closed this loophole and created a provision to prevent producers of canned and prepared foods that include fruits and vegetables from using the same loophole in the future. What the ad doesn’t say is that non-meat companies have never used this loophole, meaning the tax code didn’t raise taxes on those industries.

Although closing loopholes resulted in higher taxes for some businesses, no new taxes have been imposed on producers in the state. Apparently the campaign saw the light: they pulled the ad from their YouTube page.

Yes On 1107 Removed False Ad

However, the campaign website still features two ads that emphasize that I-1107 taxes apply to local food products, with no mention of out-of-state producers.

Learn more about Initiative 1107.

Economic Opportunity Institute Policy Director Marilyn Watkins endorsed I-1098 in The Columbian because of small business benefits:

For middle-class families as well as businesses, I-1098 also reduces the state portion of the property tax by 20 percent. That totals $400 million, money families and businesses can turn around and spend.

Washington’s Office of Financial Management estimates 118,000 businesses will be newly exempt from B&O taxes and 39,000 more businesses will see a B&O reduction.  According to Watkins, only 38,400 out of 3.2 million filers (top 1.2 percent) will pay the income tax.

So, I-1098 takes the money before the owner gets a chance to reinvest. Might as well hold on to your profits instead of earmarking them for expansion if you’re going to owe money to the state regardless, right? Well, no … (Business) owners can simply deduct the investment from their income for tax purposes in the following tax year and get reimbursed.

However there are also data suggesting that the tax will cause a chill in the business climate:

The Association of Washington Business surveyed their 7,000 member businesses about I-1098. Thirty-three percent of respondents indicated they would reduce hiring and salaries if the income tax became law. Forty-seven percent said they expected to decrease investment in their businesses.

Job creation claim: neither side can do anything but hypothesize.

As to opponents’ claims that money and business owners will leave Washington if I-1098 passes, they have used apples-to-oranges comparisons to states like Minnesota and New Jersey. Whereas Washington’s I-1098 would tax the income of less than two percent of its citizens, the income tax laws of Minnesota and New Jersey affect almost all of their citizens.

The “1098 is anti-business” sentiment has been shared by The Spokesman-Review, The Wenatchee World, The Seattle Times and a laundry list of special interest groups. The opposition argument generated media attention after Texas Governor Rick Perry sent letters to approximately 90 Washington businesses and employer groups, invited them to relocate to Texas should voters endorse I-1098. Texas is one of eight states that does not currently have a personal income tax [1].

Hanauer told media that the opposition argument implies that business owners and entrepreneurs are robots who care only about taxes and nothing else. He argued that the cultural and social climate for business, as well as basic infrastructure, is “infinitely” more important than the income tax level.

“If it were true that [an income tax] would drive everyone away, then places like California and New York would have driven their businesses away,” said Hanauer. “If that were true, Silicon Valley would be in South Dakota. If that were true, Wall Street would be in Wyoming.”

Hanauer’s point is grounded. According to the non-partisan Tax Foundation, California and New York have the “worst business tax climates” while South Dakota and Wyoming have the best and third-best tax climates, respectively. Washington places 11^th with its current tax structure.

However, looking at GDP, California ranks 8th in the world, Texas is 14th and New York is 15th. (They rank 1st, 2nd, and 3rd among the 50 states.) South Dakota ranks 47th of the 50 states and 123rd in the world; Wyoming is 48th and 125th. Thus the allegation that an income tax would lead to business flight appear to be invalid.

[1] States with no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington and Wyoming. However, several have corporate income taxes: Alaska, Florida, New Hampshire and South Dakota. Washington has a business and occupation tax on gross receipts.

Learn more about Initiative 1098.

In their analysis, King 5′s Robert Mak explains:

Commercial: “Even worse, they put new taxes on food products made by Washington companies, like locally made chili and pancake mix, but not on similar products made by their competitors in other states or countries.”

If you buy any of these products (chili or pancake mix), there’s no new sales tax that you, the consumer, would pay at the grocery store today. What this ad refers to, is that some of these manufactuers pay business taxes to the state because they do business and have a plant in Washington.

[...]

Bottom line: The makers of blueberry pancake mix have always paid the higher business and occupation tax rate. And the state says they’re paying the same today as they always have. And that’s why the claim in the commercial is false.

Learn more about Initiative 1107.

Seattle’s weekly newspaper The Stranger disagrees, offering a comparison with California as rebuttal:

[L]et’s compare Washington to another state that has privatized liquor. California has an underage-drinking rate of 26.3 percent of teenagers, far below Washington’s 31.3 percent rate, according to the federal government’s Substance Abuse and Mental Health Services Administration.

However, neither The Stranger’s comparison to current practices nor the Protect Our Communities supposition can answer this question. This is a “what if” question that cannot be answered. Beer and wine are widely accessible in Washington, and it possible to get “as drunk” on beer and wine as hard alcohol.

Learn more about Initiative 1100 and Initiative 1105.

Darby may be alluding to slotting fees, “payments made by food producers and manufacturers to purchase shelf space in retail stores.”  However, according to Paul Beveridge, president of Family Wineries of Washington State, federal and state alcohol and antitrust laws prohibit slotting fees. In 1995, the U.S. Bureau of Alcohol, Tobacco and Firearms adopted regulations “that ban slotting allowance practices in the retail sale of alcohol beverages (60 Federal Register 20402)” (pdf).

It is possible that Darby is alluding to the fact that the current regulatory structure prohibits volume discounts. Small wineries feel protected by the current law. According to John Guadnola, executive director of the Washington Beer and Wine Wholesalers Association, “uniform pricing means a grocery store pays the same whether it buys one bottle or 100 bottles.”

The bottom line, according to King 5 News:

There’s nothing stopping retailers from pushing small wineries off the shelf today.  And there’s nothing in these initiatives that would give stores more power to push out small wineries.  What is a legitimate debate is whether allowing volume discounts would create incentive to carry only the most popular wines and beers.  And each store and chain would make its own decisions on what customers value more:  price or selection.

Learn more about Initiative 1100 and Initiative 1105.