By Jason Mercier, director of the Center for Government Reform, Washington Policy Center
In November the people of Washington will vote on Initiative 1634. If enacted, the measure would work as a restriction on imposing discriminatory food taxes, such as a tax on soda distribution. Under current law, local governments are not generally able to place a sales tax directly on food items.
As demonstrated by Seattle’s new soda tax, however, local officials can decide to impose a “privilege tax” on the distribution of food items. Initiative 1634 would close this loophole at the local level. A “yes” vote on Initiative 1634 would prevent new local food taxes.
Under Initiative 1634, local government officials would retain the authority to impose broad-based taxes and fees on grocery items, as long as the tax rates were applied equally to non-grocery items. This means local taxes and fees in the future could not be imposed if they targeted only certain food products.
If taxed, food items would have to be treated the same as other consumer goods; food consumers could not be singled out for discriminatory treatment. For example, a local standalone tax could not be imposed on candy or soda. The state’s taxing authority would remain unchanged.
In general, the people in our state don’t want officials to tax groceries. Washington voters have twice passed ballot measures to repeal taxes on food items. In 1977, 54 percent of voters adopted Initiative 345, to exempt food products from sales tax.
In 2010, 60 percent of voters adopted Initiative 1107 that repealed the Legislature’s tax increase that year on soda and candy (among other food items). Under current law, local governments are prohibited from imposing a sales tax on food items. Seattle’s “privilege tax,” however, shows the local loophole to this restriction.
Though it could be applied to other food items, the most likely target of a local government for a discriminatory food tax is soda. Taxes on soda drinks, however, are very regressive and disproportionately impact low-income families.
According to the national Tax Foundation: “At the end of the day, soda taxes are a regressive tax on a product that’s probably fine in moderation. These taxes likely won’t fund what’s being promised, won’t resolve the obesity problem, and will hurt workers and consumers. Based on the mounting evidence, fans of the soda tax might want to take a step back and consider what’s best in the long-term, not just the short-term political gains.”
This ballot measure is not the first effort to ban local food taxes in the country. The state of California recently enacted a law prohibiting new local soda taxes until at least 2031. Arizona earlier this year adopted a law to prohibit local governments from imposing discriminatory food taxes.
Last year Michigan enacted a law preventing local governments from imposing food taxes. Voters in Oregon are considering a constitutional amendment this year to prohibit a “sales tax, gross receipts tax, commercial activity tax, value-added tax, excise tax, privilege tax, and any other similar tax on sale of groceries.”
The question facing Washingtonians with Initiative 1634 is whether our state should follow the lead of California, Arizona and Michigan and prohibit local governments from imposing taxes on food items.
Jason Mercier is the Government Reform director for the Washington Policy Center, a nonprofit, non-partisan research organization with offices in Tri-Cities, Spokane, Seattle and Olympia.