Jay Inslee delivered his State of the State speech to members of the Legislature yesterday, re-iterating everything that is wrong with tax policy in the states—or so a top tax analyst and Forbes contributor says. During his speech, Inslee said his budget introduced revenue proposals that would address what he insists is the “nation’s most unfair tax system,” i.e. Washington State’s tax system. Among the ways Inslee proposed to implement a “fair” tax system is through a capital gains tax.
Yet, what our green governor calls “fair,” a top tax analyst calls “a dumb idea.” David Brunori (a Forbes contributor and state and local tax law professor at George Washington University Law School) delivers a stinging review of Inslee’s budget in a recent Forbes column. He writes that if one wanted a bad tax policy, they could simply follow Inslee’s budget proposal as a blueprint.
Brunori takes particular issue with Inslee’s capital gains tax—what Republican lawmakers refer to as a version of a state income tax. He questions why—at a time when “governments around the world are reducing taxes on capital”—Inslee would want to impose a “7 percent capital gains tax on a narrow band of Washington residents.” Of course, our green governor would say that the state needs money. But, as Brunori writes, that’s “what drug dealers and bank robbers say when asked why they do what they do.”
The simple reality is that “taxing mobile capital in a world economy is a dumb idea”—no matter how much a state may or may not need the money. Taxing a “small number of people to get money to purportedly help the masses” illustrates “all that is wrong with big government.” Brunori,
If the services provided by Washington are so important, why aren’t they funded with broad-based taxes? I will tell you why: Because nobody would want to pay. The sham is the promise of government goodies without any responsibility for paying. I note that not too long ago, the people of Washington rejected adoption of an income tax that would fall only on those making more than $400,000. People often see through the sham.
But, that’s not where Inslee’s bad tax policy ends. Brunori points out that Inslee would “like to extend tax breaks for the biotechnology and environmental technology industries.” Inslee wants people to invest in those industries, but then seeks to impose a capital gains tax on investments once people sell—a factor that encourages people not to invest.
Ladies and gentlemen, our green governor’s illogical and just plain bad tax policy.