WA analyst: Inslee pretending that capital gains tax is not income tax

Governor Jay Inslee is once again pushing a capital gains tax, which he says will target the wealthiest residents. Washington Policy Center’s Jason Mercier says it’s disingenuous for Inslee to pretend that this is not an income tax, and that the timing is poor to begin with. He joined the Dori Monson Show to discuss.

“Our current budget is balance in the middle of the pandemic. We have billions in reserves and state revenue is projected to increase, to increase by over 7% without a cent of new tax increases. So in that fiscal context, knowing that businesses and families are still suffering over some of the strongest government imposed economic restrictions to respond to COVID-19 across the country, the fact that we’re talking about any tax increases just shocking, let alone the fact we’re now seeing yet again a proposal for an income tax,” he said.

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“And I feel like I’m stuck in Alice in Wonderland here, hearing the governor say it’s not an income tax. What does he know that the IRS and every other revenue department across the country doesn’t?”

Mercier says there’s no doubt that this is an income tax, and that pretending otherwise is disingenuous, not that that’s a new feature regarding capital gains tax proposal in Washington state.

“This is not new. We’ve been having this kicked around for eight years. And when I first heard this proposal I was confused by it, because what’s an excise tax on capital gains, capital gains or income? So I personally contacted the revenue director of every state in the country. And frankly, several of them laughed at me when I described what was being proposed in Washington state … in every single state it’s an income tax,” he said.

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There’s a reason such a tax hasn’t taken hold in years, Mercier says, due in part to it potentially being unconstitutional.

“Washington is one of nine states without a personal income tax, but that is not for lack of trying. The voters have been asked 10 times to do this, six times with constitutional amendments, and the answer has been ‘No, thank you.’ And the reason why this is having to be a constitutional amendment is because Washington’s Constitution has the broadest definition of property in any state constitution,” he said.

“It says ‘property is everything subject to ownership, whether tangible or intangible.’ And the Supreme Court for almost 100 years has said you own your income, and if you own your income, it’s property. And that’s why you’re seeing this game here calling a capital gains tax an excise tax because they know the minute it passes, they’re gonna be sued for passing an unconstitutional income tax,” he added. “But we know from public records from lawmakers that’s their goal. They see this as their best chance to get a graduated income tax without a constitutional amendment, hoping that the Supreme Court will change its mind.”

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