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Legislation

Last Friday we posted a piece on the proposal to slap a 95%  tax on electronic cigarettes and nicotine-infused liquid used in “vaping,” an issue that has since received broader media exposure and has had a public hearing in the state House.

This week, the state House Finance Committee voted to send House Bill 2795 – a Democrat-sponsored measure that originally sought to extend the 95% tax rate that is currently imposed on sales of most tobacco products to electronic cigarettes, known also as e-cigs – to the floor for debate after reducing the proposed level of taxation to 75%.

State Rep. J.T. Wilcox (R-Yelm) sits on the Finance Committee that heard public testimony Friday. Wilcox sat down to describe on video the strong public opposition he saw and heard from vapers who fear that a repressive tax like the one proposed would literally kill a business they feel is saving their lives.

“Testimony was very compelling from former cancer patients, from people who had used vaping to stop smoking, and even from one representative who told us that they thought that their father or mother would still be here if they would have had this alternative to smoking,” Wilcox recalls.

Please watch the entire video below and be sure to check out the State House Republicans official YouTube channel where videos by Wilcox and other members speaking out on hot button issues are posted frequently.

Even at the bargain rate of 75% (sarcasm alert), slapping a punishing tax on a product that can provide some benefit to people attempting to escape the certain harm of smoking tobacco seems foolish. Our readers seem to agree.

Our nonscientific quick poll of Washington Focus email subscribers conducted last Friday found strong opposition to the proposal with 69 percent of respondents stating they do not support the higher tax on e-cigarettes compared to 27% who support the idea.

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A bill moving through the state House intends to make vapor-producing electronic cigarettes equal to the harmful product they’re designed to replace, at least in the eyes of government tax collectors.

On Friday, the state House Finance Committee heard public testimony on House Bill 2795, a Democrat-sponsored measure that would extend the 95% tax rate that is currently imposed on sales of most tobacco products to electronic cigarettes, known also as e-cigs.

If enacted during this session, the tax would take effect 90 days after session adjourns.

The bill envelops only non-FDA approved tobacco substitutes (products containing nicotine but not tobacco) and electronic smoking devices under the expanded taxing rules. Your granddad’s pipe and Kojak’s lollipops will still be sold under the general retail sales rate.

Because the e-cig device is designed to deliver a nicotine-infused vapor that does not contain the tar and other carcinogens in tobacco smoke, e-cig sales in the U.S. have grown rapidly as an alternative to traditional tobacco cigarettes.

Although the jury’s still out on the health risks of nicotine-only products, the upsides of “vaping” for those who want to manage their health by ridding their lungs of tobacco smoke seem obvious.

So why are lawmakers proposing to levy the same 95% tax on e-cigs as has been tacked onto tobacco cigarettes, a serious and known health hazard?

One might ask if by making it much harder for the fledgling e-cig industry to steal away customers from traditional cigarette manufacturers, are Democrats now doing the dirty work for Big Tobacco? HB 2795 has no Republican sponsors. But in all likelihood, HB 2795 is just another Democratic revenue hunt.

The Office of Financial Management’s fiscal analysis of HB 2795 projects revenue to the state of nearly $39 million in the 2015-2017 biennium and more than $76 million in 2017-2019, but even more important is recognizing the long-term effect on the state budget when high-revenue generating tobacco users migrate to lower-taxed electronic cigarettes.

Tobacco taxes flow into education coffers. In the beginning, that meant something of a reliable windfall until people did what they always do—they began to buy less of the product and the state has continued to see tobacco tax revenues in slow decline.

Now, smokers are tempted to pursue better judgment and switch to no tar and low-tax electronic cigarettes. If that trend holds, the result under the current law would be less revenue coming into the state, creating new pressure on an already McCleary-stressed education budget. Attaching a similar high rate to the emerging replacement product is a simplistic solution, but one that makes as much sense as extending Washington’s nation-leading gas tax to include solar panels.

In the beginning, exorbitant tobacco taxes were deemed appropriate because of the product’s potential to do serious harm. The most drastic increases in those taxes came at a time when the medical and scientific communities were generating reams of research documenting the harmful effects of tobacco. We came to the proper conclusion that tobacco products are not only bad, but very, very bad, in fact, bad enough to justify government interference in the marketplace.

The imposition of a burdensome “sin tax” worked to a large extent, in tandem with billions spent on public education programs, legislation to restrict tobacco marketing and dragging tobacco companies into court. Far fewer Americans smoke today than did 20 years ago, in part because the high tax on a pack of smokes provides an economic disincentive for consumption as well as offsets costs to society at large.

There needs to be some basis for classifying products as worthy of punitive taxation and no such case has been made regarding electronic cigarettes. In truth, some case for harm can be made for almost any product known to man. Even if we assume that there may be some harm from using nicotine, a layperson’s review of the available research would seems to rank its potential harm in the neighborhood of caffeine. (Imagine paying $10 for a 12-pack of Coca-Cola and $7 for a grande latte.)

Another cynical assessment is that the unintended consequence of HB 2795 is that it becomes a punishing tax on the poor. The poor are more likely to be smokers than people in higher earnings brackets, but by robbing them of the economic benefit of using a less harmful and less expensive product the state government would be sending them on a one-way ticket to higher insurance premiums. Under Obamacare, insurers are permitted to charge tobacco smokers 50% more than non-smokers.

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HobbsOffice

Sign on office of state Sen. Steve Hobbs.

State Sen. Steve Hobbs (D-Lake Stevens) ducked the vote Wednesday in the state Senate on a bill to amend the State Constitution to permanently impose a 2/3 vote requirement on the Legislature for raising taxes, according to sources in the state capital.

Ever since the state Supreme Court ruled last year to strike down several voter-passed initiatives, it has been clear that re-installing the brakes on Olympia’s ability to tax would require amending the Constitution, a difficult feat by design.

Even before the Republican-led Senate Majority Coalition Caucus pushed forward the referendum measure, it was deemed unlikely they would get the 33 votes needed to kick the issue over to the Democrat-controlled state House (where it is likely no further action would have been taken). The move was still important symbolically – to demonstrate that Republicans still corner the market on representing the will of the voters on the issue of taxation – as well as politically – to isolate targeted Democrats in swing districts, Democrats like Hobbs.

425px-Steve_HobbsDemocrats will similarly be targeting members of the Majority Coalition such as state Sens. Rodney Tom (D-Medina) and Andy Hill (R-Redmond), but while their names appear in the voting record as Yea votes, Hobbs did not cast a vote.

According to eyewitness accounts from Olympia, Hobbs was simply ducking the vote. While the floor debate and vote were taking place, Hobbs’ car was parked in his official spot and on his office door hung a sign: “In meeting. Be back at 1:30.” Sources tell us that Hobbs voice could be heard clearly in the waiting area nearby and visitors exiting the office conversed in detail about a conversation with the Snohomish County senator.

But on Wednesday the real mystery wasn’t where Hobbs was, but why he felt the need to go AWOL in the first place. After all, Hobbs constituents made their will known the last time the 2/3 question came before voters statewide. When Initiative 1185 won a landslide victory at the ballot box, almost 64 percent of voters agreed to make it harder for Olympia to raise taxes, and in Hobbs’ 44th, the vote was slightly more decisive – 68.6% of voters approved I-1185.

So, it should have been easy for Hobbs to cast a vote that represented the recent will of his constituents. Why wasn’t it? Only Hobbs knows for sure, but it probably has something to do with his having been targeted by organized labor. In 2o13, Hobbs was enough of a swing vote that the teachers union tagged him as one of the “Rodney Tom Six” in a controversial smear campaign aimed at fiscally conservative or reform-friendly Democrats in the Legislature.

At least one of the political pieces distributed by the Washington Education Association in a mostly unsuccessful “Paramount Duty” attack effort singled out Hobbs, suggesting he was “ignoring his duty” by not backing the plan put forward by Gov. Jay Inslee and Democrats in the Legislature to raise taxes to pay for non-targeted increases to education spending.

(In the end, the Senate Majority Coalition Caucus was able to get Democrats to agree to $1.2 billion in spending increases targeted to basic K-12 education without significant tax increases.)

Apparently, union scare tactics still work. It is ironic that the WEA pressure appears to have worked on Hobbs and forced him to ignore his duty to his district. Now-retiring Seattle Times editorial board member Lynne Varner saw it coming last year when she observed, “Hobbs is nervous. He’d be a fool not to be.”

We think that Hobbs now has every reason to be nervous about how the voters of the 44th legislative district will react to an act of political cowardice. If more than two-thirds of them still care deeply about reining in Olympia’s ability to increase taxes, he’d be a fool not to be.

 

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An analysis done by the Washington Policy Center concludes that the state transportation package backed by Gov. Jay Inslee and state House Democrats would cost the average Washington state driver nearly $250 more a year in higher gas taxes and vehicle registration fees and would only spend half of the revenue on funding highway construction and improvements.

According to the findings released Wednesday by WPC Center for Transportation Director Bob Pishue, not only would the transportation proposal constitute a significant hit to the wallet, but the appropriations legislation also confers new taxing authority on the Department of Transportation. From the WPC website:

The total funding package would impose a 10-cent gas tax hike over three years  (5/3/2), a 27% increase in the current state tax, higher yearly car tab fees, a new tax on trucks, a higher car registration fee, and a tax on changing a car’s ownership. In all, people would pay $5.2 billion in new taxes and fees over the first 12 years, in addition to the current financial burden lawmakers impose on citizens.

On top of all that, the tax package would provide for the legislature to give taxing power to the Secretary of Transportation. Under the bill, the Secretary could, without action by the legislature, increase the gas tax by as much as an additional three cents a gallon, or a further 8% increase.

Pisue’s entire post is well worth reading over at the WPC website.

The policy think tank’s report comes on the heels of Elway Research polling that found voter resistance to higher transportation taxes remaining high even after the Skagit River I-5 bridge collapse.

Of 402 Washington state registered voters polled, 63% were opposed to an increase in gas taxes, 53% were opposed to license tab increases, and 52% opposed tolling high-volume roads. Fifty-four percent of respondents said they didn’t believe that increasing taxes to pay for transportation taxes is something we can currently afford.

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The 2013 session of the Washington state Legislature reached its first milestone last Friday, the cutoff for all non-fiscally focused state House and Senate committees to either approve the bills in their docket or allow them to die on the vine.

The list of casualties and survivors contains a mix of good news and bad.

The Dead.

In the Democrat-controlled House, bills that would have established a 90-day standard for decisions on government-issued permits (House Bill 1236), required transparency and accountability for regulatory agencies (HB 1163), required cost burden analyses for new regulations (HB 1162), and moved to expand the definition of renewable energy to include naturally self-renewing hydroelectric power (House Joint Resolution 4200) will not see a vote this session.

Also among the departed, a trio of House measures (HBs 1463, 1464 and 1465) that composed an overhaul of the state’s inefficient and costly workers’ compensation and industrial insurance system. On the other hand, the less partisan-divided Senate passed its companion bills. Those hopeful for reforms to workers’ comp can look to at a split Legislature as a possible good omen for movement on the issue.

The Living.

The Legislature’s attempt to solidify and protect the 2/3 vote requirement to raise taxes that statewide voters have passed five times with an amendment to the state constitution survives in both bodies. (HJR 4206 and SJR 8205)

Ahead of what many predict will be a wave of new environmental regulations and executive orders led by Gov. Jay Inslee, HB 1113 sets forth a simple requirement before action can be taken: supply the scientific, peer-reviewed evidence on which the actions are predicated.

Also, among bills still breathing, the creation of a state income tax is alive and well in the House (HB 1545) though it is unlikely that the income tax measure has enough votes for passage in the Senate. The swing coalition represented by Majority Coalition Caucus Leader Rodney Tom (D) is less likely to vote against the wills of their districts as represented by the voters shooting down of a state income tax  when it was last on the ballot in 2010 (Initiative 1098). Even in strongly Democratic districts (including Tom’s district of Medina), voters firmly rejected the creation of a state tax on individual earnings.

The proposal to replicate Seattle’s costly mandates for minimum paid family and sick leave for all workers statewide is also still lurching forward in the House (HB 1313), though a companion bill in the Senate did not emerge from committee.

A small ray of light exists in both bodies handling of education reform. The proposal to establish a 3rd grade reading standard moves forward in the House and Senate (SB 5237 and HB 1452).

Most Budget and Tax Bills Still Under Construction

Fiscal and transportation committees have until Mar. 1 to report out bills to their respective bodies. So, most issues of taxes and spending – including the House Democrats’ tax-increasing transportation proposal, extension of a beer tax (SB 5039) that was originally promised to be temporary, among bills that could have a dramatic and negative impact on private sector employment – still have time on the clock.

Another measure that still has sand in the top half of the hourglass,HB 1877,would require the direct election of Sound Transit’s board of directors may not be sexy, but the impact of such a law if passed is undeniably huge. As Sound Transit’s influence over regional transportation planning (and spending, by extension) a straight line of accountability between taxpayers and decision-makers just makes sense.

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