Locke Cans Proposed Pop Tax Cut Ok’d Cut Will Benefit Insurers, Management Plans Help Logging

Gov. Gary Locke junked a proposed cut in the state soft drink tax Friday, noting the tax was approved by public referendum just three years ago to finance programs combatting youth violence and drug abuse.

“The voters approved this tax, and the money is needed” for an important purpose, the Democrat said in announcing the veto.

Locke signed another tax cut, this one to benefit the insurance industry. He also signed a measure barring any new specialty license plates and another allowing the timber industry to harvest timber under “landscape management plans” worked out with the state.

The measure he vetoed would have cut in half the tax on syrup used to make carbonated beverages. The reduction would have been worth about 2 cents for every cup of soda pop and would have cost the state nearly $4 million a year.

“Clearly, the people of the state indicated their support” for the tax and its use to finance anti-violence programs for young people, Locke said in his veto message.

Republican backers of the reduction noted the pop tax increase was lumped in with increases in the tobacco tax. They contended voters simply did not understand in 1994 when they approved Referendum 43, a package of tools used to fight youth violence and drug abuse.

Sen. Ann Anderson, R-Acme, said voters were misinformed about the contents of the initiative and thought they were voting for “sin taxes,” not a tax on soft drinks.

Spokane Republican Jim West , the Senate budget chief, said the lost revenue for the “violence-reduction and drug-enforcement account” would have been made up with a $4 million-a-year appropriation from the general fund.

But Locke and Democratic foes said that would be a mistake. They said the special account needs its own revenue source to guarantee that it won’t be eliminated in future years if general-fund money gets tight.

Democrats said voters did understand what was in the referendum, which passed by a two-thirds majority.

“Certainly they understood it as much as they understood what was in some of the ballot measures the Republicans will never change because of their claimed reverence for the public’s will,” such as spending limit Initiative 601, said Rep. Hans Dunshee, D-Snohomish.

Locke signed a measure restoring a tax break to insurers - a tax credit against fees insurers pay into guaranty associations. The money collected by associations is used to pay off subscribers when one of the insurance companies in the association fails.

The tax break allows insurers to subtract from their premium tax bill the fees paid into the guaranty associations. The tax break does not apply to fees paid before the break was signed into law, however. The tax credit, worth about $2.3 million a year to the state treasury, was repealed by the 1993 Legislature as it scratched for money.