It will take years to fully understand the full financial implications of the COVID-19 pandemic. For now, however, the raw numbers strongly suggest that the Washington state government is rapidly climbing out of its hole.
The state’s projections show that revenues will be about $ 1.9 billion above original expectations between 2021 and 2023. Projected revenues for the current fiscal cycle are now around $ 1.3 billion above those expectations. When President Joe Biden signed the latest Massive Pandemic Aid Act, he put more than $ 7 billion right on the books of Washington state and local governments. Regardless, the bill will send the state hundreds of millions of dollars more for childcare and education. Add to this the $ 1,400 stimulus checks for individuals, which are increasing rapidly for families with children.
While recovery from this deadly pandemic is sure to be a long and difficult process, it appears that Olympia has no shortage of cash to move on to rebuilding. So, of course, the Olympic Democrats decided to try a tax hike.
The proposal, narrowly passed by the Senate earlier this month, provides for a capital gains tax on the sale of assets over $ 250,000. Governor Jay Inslee introduced a separate capital gains tax that would lower the limit for individuals to $ 25,000.
Backers have forecast that the higher-limit version would affect 8,000 to 18,000 people by fiscal 2023 and raise between $ 500 and $ 1.1 billion annually.
It’s a classic example of tax policy aimed at concentrated wealth. Retirement accounts and home sales would be excluded. Mercer Island Democrat and State MP Tana Senn promised, “The excise tax on extraordinary profits … will only affect 1% of the households in our state.”
Such a goal, however, is naturally against the Washington Constitution, which states, “All taxes must be uniform on the same class of property …” The word “property” as used here means and includes everything, tangible or intangible, subject to ownership. “The courts understood this to mean that Washington, when it was founded, forever denied itself the power to levy a tiered income tax. Income is property. The state cannot just soak the rich; it needs to soak all evenly.
State lawyers may believe they can torture the language until income is no longer considered property, despite the fact that the Washington Constitution clearly states so. But there is also the obstacle to the nationwide referendum that an income tax would likely face, as has been the case several times in the past.
It always lost. In 2010, a similar state income tax on the rich, Initiative 1098, was defeated at a disastrous 64-35%.
Why does the democratic majority in Olympia want to raise this new tax? In the midst of a crisis, why spend time and political capital looking for money that the state doesn’t need right away, money that the courts have declared impossible, and money that voters have repeatedly refused to take away? ?
This tax isn’t really about repairing the economic damage caused by the pandemic. Governor Inslee suggested something similar in his budget for 2019-2021 before there was even damage to be repaired. The real motivation is a moral one: the desire to repair Washington’s regressive tax structure. In the minds of the Democrats who support these new taxes, and many others who have liked them over the years, this is a quest for moral virtue, a reversal of our financial sins.
Washington’s tax law doesn’t make it easy to be poor or even middle-class. Sales taxes on daily necessities make it difficult to raise a family. Corporate and occupational taxes are crushing small businesses. It’s hard to imagine the tax being more regressive than the 49 cents we currently pay to Olympia for every gallon of gasoline. Perversely, even the sin taxes we impose on cigarettes and alcohol end up cruelly on those in need.
The way Washington handles its money puts a heavy strain on people who live on the edge of financial survival – people who see the difference between a $ 100 car tab and a $ 30 car -Tab matters. If the Democrats were to use majority voting to lighten that burden, it would be a moral quest worth pursuing.
But this search is a completely elite-oriented concept. A group of elites in Olympia wants to persuade another group of elites in court so that they can take hundreds of millions of dollars they don’t need from a third group of elites: the winners in the technology, business and real estate sectors. If the elites who run NGOs and think tanks publish their testimonials that states have the worst problems with inequality, the elites in Olympia will get a better grade. Then, presumably, they’ll take their tax-paid salaries and celebrate their success in fancy restaurants owned by some of the same people on whom they imposed this capital gains tax in the first place.
The whole thought process behind this tax proposal is for the overpaying people without a care. Yes, if we take that $ 500 million or $ 1 billion away from tech geniuses and their landlords, we’ll improve our standing on think tank equality reports. But nothing about this bill requires the money to be spent cleaning up the ugly aspects of our tax laws.
This calculation is not intended to help the many, but to save the conscience of a few. Indeed, the few seem to believe that we are the ones who are not doing our fair contribution. This January, the Democrats tabled a bill in the State House to raise our gas tax to 67.4 cents a gallon to send it past California and give us the title of worst in the nation. If you’re lucky enough to own an expensive hybrid or electric car, that probably sounds like a great idea too.
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