According to a recent op-ed by Democrat state Rep. Laurie Jinkins, Washington State is the “odd state out” when it comes to a state capital gains income tax. And, presumably, that’s enough to consider implementing the new tax in our state. The capital gains income tax, Jinkins claims, would make out state tax system “fairer” when compared with other states.
Jinkins also claims that the new tax would only impact “about 32,000 of the 7 million people in Washington” while bringing in $1.2 billion for basic education and $490 million for higher education. Interestingly enough, in another op-ed, Jinkins wrote that she “went through her contacts” searching for her friends or acquaintances who would pay a capital gains income tax and would be willing to write in favor of it. She found plenty of people who supported the tax. The problem she apparently encountered was that “none of them would actually pay the proposed tax on investment profits, because they don’t meet the thresholds year after year.”
And, therein lies the problem of a capital gains income tax. With one offhanded comment meant to make a point of how few people would actually pay the tax, Jinkins refutes all her previous claims. Only, the tax-happy Democrat doesn’t quite see that.
A capital gains income tax is a highly volatile and unreliable tax. Jinkins is wrong to assign a number to how many would pay the tax or how much it would bring in because, simply put, no one knows. As Jinkins accidently pointed out, who does or does not pay the tax varies year after year.
Making matter worse, the trade-off of the volatile capital gains income tax is uncertainty—an uncertainty that negatively impacts economic growth. A study conducted by the Tax Foundation found that our nation’s high capital gains tax—let alone an additional state-level capital gains tax—is “problematic, because the capital gains tax creates a bias against savings, slows economic growth, and places a double-tax on corporate profits.” The study ultimately concludes that repealing the capital gains tax is the best course of action in order to “stop the damaging practice of taxing individuals on inflation” and “produce positive long-term dynamic effects for the economy.”
Top Washington State tech job creators the likes of Madrona Venture Group’s Tom Alberg and Concur CEO Steve Singh would agree. At a recent Technology Alliance luncheon, both “stressed their opposition to the idea of a capital gains tax in Washington state.” GeekWire,
“‘I think it dampens investment. I think it tends to focus on a one-year gain for an entrepreneur who starts a company,’ said Alberg, who sits on the board of Amazon and bankrolls many startups in the Seattle area. ‘I don’t think it is the right way to approach overall tax policy.’
“Singh, who just sold his Bellevue software company to SAP for $8.3 billion, was a bit more blunt when it came to the idea of a capital gains tax.
“‘No,’ said Singh. ‘And here’s why: We have plenty of tax vehicles. If you want to raise the taxes, fine. Raise them within the tax vehicles that we have. Adding new taxes, in my view, what ends up happening in the way that our politics works today it would becomes massively, massively polarized, and we start beating up on members of society… Look, there has to be some discipline in how we run our state. I am not against paying more. I am all for paying more. I am all for investing more in education, and every other area. But you have plenty of other places to raise taxes.’”
The question is, whom should we listen to? Another liberal (Jinkins) with an agenda or top tech job creators in our state?