Other Views: Stop Name Games with Income Tax on Capital Gains in Washington

Commentary by the Seattle Times Editorial Board

Washington’s experience with a capital gains tax should weigh in on its true merits. Unfortunately, tax advocates don’t seem to resist putting a pinkie on the scale.

A rhetorical fog has always hung over the true impact of the tax, which is actually as straightforward as mathematics. Recently, and disappointingly, Attorney General Bob Ferguson attempted to link tax-friendly language — a policy made by his Democratic allies — to a ballot initiative to abolish it. Tuesday, he wisely reconsidered. This decision should set a new tone moving forward for a fair public conversation.

Ferguson has followed lawmakers’ lead in attaching the phrase “consumption tax” to an issue such as passive-aggressive Post-its. This stubborn brand does not change reality. Senate Bill 5096, passed in 2021, income taxes. Any other than that brazenly skews the discussion.

If the tax is implemented, the state will collect 7% of annual personal earnings over $250,000 from investment sales, such as stocks. Fine print excludes retirement accounts, real estate, some farming and small business interests, among other sources. This would directly encourage the wealth generated in Washington to leave. Eight countries do not tax capital gains at all.

The state tax is expected to raise $445 million for early education and childcare. But state coffers have accumulated much higher surpluses in recent times. Revenue forecasts increased by $1.9 billion in the middle of the 2021 legislative session before SB 5096 was passed, and rose again a year later, by another $1.45 billion. This steadily available additional money for legislative priorities is arguing loudly against the need for a new tax.

To get around the problem, proponents have taken out old tricks of smoke and blue mirrors. Section 1 of the bill includes a significant request to “progress toward rebalancing the state tax code.” It does not matter that it funds larger services, not relief for low-income families. Don’t worry about the negative consequences of throwing a new tax on a poorly organized pile.

The capital gains tax has been rightly stopped in court due to the state’s constitutional restrictions on taxation. It was read by Douglas County Superior Court Judge Brian Hooper as overstepping the bound in March and saw clearly by whitewashing the “consumption tax,” an analysis that should resonate when the state Supreme Court inevitably decides the validity of the tax.

Ferguson should not sign Mallarkey’s “excise tax”, which is intended to shine a light on voters. Thursday’s Thurston County court hearing needs to craft clear, unbiased language for an initiative that challenges a capital gains tax that may be on the ballot this fall.

This discussion should be carried out above the board, and not with rhetorical games.

Leave a Reply

%d bloggers like this: