Effectively-known arguments with the most recent capital beneficial properties tax proposal

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Well-known arguments with the latest capital gains tax proposal

State lawmakers introduced another income tax on capital gains, this time to partially fund childcare. Praise and criticism came at its February 11 public hearing in the House Finance Committee, which reiterated criticism of similar proposals.

HB 1496, sponsored by Rep. Tana Senn (D-41), would impose a seven percent tax on investment income from the sale of long-term assets that are “tangible” property, while a 9.9 percent tax on income from the sale of all other long-term assets. The tax is projected to generate $ 835 million in the 2021-23 biennium and $ 1.8 billion between 2023 and 20. Most of the money would go to the Fair Start for Kids account, the rest to the general fund account.

Senn told the committee, “It is time for a capital gains tax to fund the necessary investments. Investing in childcare makes sense, and we can do that by giving a little equity back to our tax laws as well. “

However, as with other related bills, HB 1496 has been thoroughly scrutinized by tax experts who have questioned its timeliness, practicality and legality. Joe Bishop-Henchman, vice president of the National Taxpayers Union Foundation for Politics and Litigation, told the committee that capital gains are an incredibly volatile source of income. “If one of the stated goals of introducing this tax is to improve stable sources of tax revenue for key government services, it will have the opposite effect.”

Jason Mercier, the government’s reform director at the Washington Policy Center, noted that states like California had such problems budgeting income from capital gains that they passed a constitutional amendment in 2014 that set that money aside.

Another hurdle for proponents is that while these bills are portrayed as excise taxes, Bischof-Henchman said, “Transaction taxes have no exemption levels. They are not levied on annual sums. This is an income tax – not a transaction tax. State income taxes do all of these things. The Internal Revenue Service (IRS), every other state, and tax professional all agree that capital gains are income. “

“There is not a single state in the country with an excise tax on capital gains,” said Mercier. “You are the revenue from sales. This is also the reason why the nine states with no income tax do not tax capital gains. “

In the event of an enactment, Freedom Foundation director of labor policy, Max Nelson warned that his organization would file a lawsuit, as it did when Seattle passed its own communal tiered income tax in 2017, which was ultimately ruled out by the appeals court. However, the same decision also repealed a 1984 law prohibiting local governments from collecting income tax. According to the state constitution, property taxes must be the same or the same, depending on the property class.

Nelson added that the tax was also poorly timed. “Any rush to raise new taxes should always be viewed with skepticism.”

As a private citizen, Aaron Lang testified that while proponents see the bill as an investment in childcare, “it is a compulsory acquisition of assets built by others to pass on to those who do not invest themselves would bring their own capital gains. If the legislature values ​​childcare, find another way to fund it. “

At the beginning of this session, Senator June introduced Robinson (D-38) SB 5096, which the Senate Committee on Ways and Means has not yet clarified after its public hearing on January 14th. In the meantime, the State Department of Commerce has cut away the previous branding on its Choose the Washington website Promoting Washington’s status as a state with no corporate or income tax, despite its officials previously calling it a selling point for attracting businesses.

Although HB 1496 provides various exemptions for certain types of capital gains, Washington Cattle Feeders Association executive director Jack Field advised the committee that the tax, as currently written, would apply to the sale of forage animals that would normally be less than a year being held. “Every time they sold cattle, they were hit by the capital gains. The capital gains tax in this situation would place a heavy burden on feeder families in Washington. “

No further measures are planned for HB 1496.