Judge strikes down taxes in spending-limit lawsuit

01:48 PM PST on Saturday, March 18, 2006

Associated Press
King 5 News

OLYMPIA, Wash. - A Snohomish County judge has struck down a key package of tax increases on liquor and cigarettes, agreeing that lawmakers illegally bypassed voter-approved spending limits to enact the new fees.

The judgment, issued Friday by Superior Court Judge James Allendoerfer in Everett, invalidated an omnibus tax plan that Democratic lawmakers used to balance the two-year state budget during the 2005 session.

State officials are likely to appeal the ruling, which essentially would require a statewide vote to keep the $263 million, two-year tax package in place.

But Attorney General Rob McKenna, whose office argued the case, didn't commit to any further action Friday night.

"We're studying the opinion and then we're going to review the options with our client," McKenna spokeswoman Janelle Guthrie said.

The court challenge was launched by the Washington Farm Bureau, Washington State Grange, state chapter of the National Federation of Independent Business, the Building Industry Association of Washington and the Evergreen Freedom Foundation.

Their lawsuit targeted the 2005 Legislature's overhaul of state taxation and spending limits stemming from Initiative 601, which was approved by voters in 1993.

In a verbal ruling from the bench, Allendoerfer affirmed their assertion that lawmakers artificially inflated the state's spending limit by moving $250 million between various state accounts.

The judge said the resulting taxes were therefore illegal without a statewide vote, as called for in I-601, lawyers in the case said.

"We want there to be real spending limits, and I think this is a step in that direction. It's a huge step," Farm Bureau spokesman Dan Fazio said.

Rep. Jim McIntire, D-Seattle and chairman of the House Finance Committee, said Allendoerfer's decision likely isn't the final word.

"There's always a chance that a higher court could make a different decision. It's happened in the past," McIntire said.

The bill overturned by Allendoerfer was a combination of tax increases and tax breaks that passed by narrow margins in the Democrat-controlled Legislature. Over two years, it was expected to deliver more than $263 million.

The package includes:

--A 60-cent-per-pack increase in cigarette taxes, raising $175 million.

--A $1.33-per-liter tax on hard liquor, generating about $50 million.

--A sales tax on extended warranties on consumer products, applying to both business and individuals, expected to raise about $37 million.

The measure also contained some tax breaks, including a discount aimed at the Boeing Co.