February 9th, 2018
Lawmakers are discussing levying a capital gains tax because most Washingtonians want progressive tax reform
Legislation & TestimonyRethinking and ReframingStatements & Advisories
Next Friday, the House Finance Committee will be holding a hearing on Representative Kris Lytton’s HB 2967, which would levy a capital gains excise tax on the wealthiest Washingtonians and use the revenue to partially offset recent property tax increases.
The prospect of a capital gains tax (which Oregon and Idaho already have) terrifies disgraced initiative promoter Tim Eyman, who selfishly wants Washington’s tax code to remain as upside down as possible so there will always be an appetite for future anti-tax initiatives sponsored by him and his buddies Jack and Mike Fagan.
Accordingly, Eyman has taken a break from bashing lawmakers over the prospect of initiative process reform (which also terrifies him) to launch a broadside against the bill, in which he compared taxes to heroin, and legislators to heroin users.
“The first injection of heroin is a rush, but after that the user needs more and more and more to get that same feeling,” Eyman wrote. “It’s like that with politicians and taxes — they love the feeling of euphoria that comes from imposing a new tax, but they need to increase it again and again and again to maintain their high.”
This is utter nonsense, of course — anyone who has reported on the Legislature or followed the Legislature for any length of time knows that revenue bills are huge lifts that can require years of work, even when there are Republican lawmakers who are willing to vote aye — but the more important point here is that lawmakers are contemplating a levying a capital gains tax on the wealthy because the people of Washington want one.
NPI’s statewide research surveys have consistently found robust majorities in support of the idea of a capital gains tax on the wealthy. In 2015, when we first asked about the idea, 55% of respondents answered favorably. Last year, when we surveyed 887 likely November voters, the percentage in support of a capital gains tax was 57%.
Here’s the question we asked:
Do you strongly support, somewhat support, somewhat oppose or strongly oppose taxing the capital gains of wealthy individuals to help pay for public schools, colleges and universities?
Answers were as follows:
- Support: 57%
- Strongly support: 44%
- Somewhat support: 13%
- Oppose: 41%
- Somewhat oppose: 12%
- Strongly oppose: 29%
- Not sure: 1%
Conducted by the respected firm Public Policy Polling, the aforementioned survey of 887 likely 2018 Washington State voters was in the field from June 27th-28th, 2017; all respondents participated via landline. The poll has a margin of error of +/- 3.3% at the 95% confidence level.
“Washington has many strengths as a state, but our tax code is not one of them,” noted NPI founder and Executive Director Andrew Villeneuve. “Our regressive tax code requires those with the least to pay the most as a percentage of their income. That’s upside down. Levying a capital gains excise tax would enable us to take a step towards correcting this imbalance. A just tax system should be based on ability to pay, and ours isn’t. This is a problem Washingtonians want to see their elected representatives address.”
The fiscal note for HB 2967 is available from the Office of Financial Management (OFM). The fiscal note assumes that approximately 48,000 taxpayers would pay capital gains taxes (for taxes due in 2020) if the bill were adopted in its current form. $824.5 million would be raised in Fiscal Year 2020, and $447 million in Fiscal Year 2021.
The state also created a ten-year fiscal projection for HB 2967 as required by Tim Eyman’s I-960, which Eyman linked to in his email. NPI would like to remind you that ten-year fiscal projections only exist for the purpose of allowing Tim Eyman to throw around really big, misleading numbers when he sends out his anti-tax email missives.
Anything sounds much more impressive when you take it out over ten years. Multiply your current annual wages by ten, for example, and you’ll end up with a much bigger number.
That number ostensibly represents how much you’ll be paid — but for the next decade as opposed to the current year. It’s highly misleading, because your compensation is very likely to change over the next decade. You may even change jobs or employers, and end up with a different salary or pay structure. It is a well understood precept of forecasting that the farther out a forecast goes, the more likely it is to be in error.
The ten-year fiscal projections Eyman’s I-960 stupidly requires for revenue bills are no more useful than ten-year compensation projections, and should be ignored.
NPI plans to offer testimony in support of HB 2967 at next Friday’s hearing of the House Finance Committee. Executive Director Andrew Villeneuve will be available before or after the hearing for interviews.