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The Associated Press November 2, 2010, 5:22PM ET

Wash. state voters to decide 3 tax initiatives

Recession-weary voters are deciding a trio of state tax initiatives Tuesday: An income tax on the wealthy, restrictions on future tax increases and an attempt to repeal new taxes on candy, soda and bottled water.

The results will have immediate and long-term effects on the state's budget, which already faces another multibillion-dollar deficit when legislators meet in January.

Much of the attention was focused on the proposed high-earners income tax, known as Initiative 1098. It would institute a state income tax on the top 1 percent of incomes to pay for education and health programs while trimming state property and business taxes.

Washington is one of seven states without a personal income tax. I-1098 would be the first state income tax approved by Washington voters since a 1932 initiative that was later overturned in the courts.

The $6.4 million "yes" campaign was supported largely by labor unions, particularly those representing government employees. Nearly $2.3 million came from various branches of the Service Employees International Union.

Supporters said the state's tax system unfairly focuses on sales taxes, which consume a larger percentage of lower-income people's wealth. They also point out that state budgets have been in trouble lately, and I-1098 would generate about $2 billion per year for key programs.

The $6.3 million "no" campaign was bankrolled by some of the most prominent names in Washington business, including Microsoft Corp. CEO Steve Ballmer, who contributed $425,000, and Inc. founder Jeff Bezos, who donated $100,000.

Opponents said the tax would harm business and make it more difficult to attract top talent to major companies. They pointed out that the Legislature could change the tax brackets with a simple majority vote in two years, raising the possibility that more people could pay in the future.

Initiative 1107 would roll back higher taxes on pop, candy, gum, bottled water and certain processed foods. They were part of a package of tax hikes the Legislature approved earlier this year to help avoid deeper cuts to state spending following the Great Recession.

The tax repeal campaign was led by the national soda lobby's American Beverage Association, which contributed nearly all of the effort's nearly $16.8 million treasury. The campaign focused on how the taxes would apply to products outside typical junk food, employing a grocery-cart logo and the motto "Stop the tax hikes on food and beverages."

Opponents were vastly outspent. They raised less than $500,000 from unions, health clinics, and others who rely on the state spending bankrolled by the tax increases.

Initiative 1053 resurrects an old idea that voters have supported at least twice before: Instituting a higher bar for legislative votes to raise taxes.

I-1053, sponsored by initiative activist Tim Eyman, requires the Legislature to get a two-thirds majority on tax-hike votes rather than the simple majority required for most legislation. Lawmakers also could send taxes to Washington voters for approval.

Some of I-1053's many business supporters -- such as the oil industry and banks -- were looking to protect themselves during next year's legislative session, when Olympia will be grappling with yet another major budget deficit.

Opponents stressed that I-1053 would allow a small slice of the Legislature to overturn the usual principle of majority rule. Critics also argue the concept is legally questionable because the state constitution says most legislation is passed by a simple majority vote.

Supporters have raised about $1.3 million, with a large chunk spent on the early signature-gathering phase. Opponents compiled a $1.6 million campaign, led by unions and health care companies.

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