At the risk of revealing more than I should about the enormous financial windfall that comes with being a journalist, I’ll let you in on a secret — a proposed capital-gains tax in Washington would not apply to me.
I know, I know — hard to believe. And yet I find the issue fascinating for both its philosophical implications and its practical effect. House Democrats are pursuing a tax of 5 percent on investment income above $50,000 for a married couple and above $25,000 for an individual. The tax would exempt profits from items such as retirement funds and the sales of primary residences, and it would affect an estimated 31,500 Washingtonians. Alas, the noble profession of journalism does not make me a 0.4 percenter.
Now, before we go any further, we should mention the best argument against a capital-gains tax. That would be the one that says creating a new tax is like opening a hellmouth; once a tax is enacted, all sorts of demons are unleashed. Consider Washington’s business and occupation tax, which was born as the Business Activities Tax of 1933. It was designed as a temporary emergency tax in response to The Great Depression; more than 80 years later, it’s the zombie of taxes.
Truth is, if a capital-gains tax is approved, it’s not going away any time soon. And the odds of it growing bit by bit — half a percentage point here, a few more payees there — are about as safe a bet as the Clark County councilors doing stupid stuff.
Furthermore, the impetus behind the proposal is that Gov. Jay Inslee wants to use the revenue to help fund public schools. Considering that capital-gains taxes in other states have been shown to be more volatile than other forms of taxation, this seems risky. It would make more sense to count on a certain percentage of the revenue for schools and sock away any excess in a rainy day fund for, um, years when it rains.
Who is to say what’s fair?
Those are the practical arguments surrounding a capital-gains tax. The philosophical discussion is much more interesting.
You see, opponents tend to be those who are opposed to taxes in general; those who say it’s harmful to levy a tax that hits our wealthiest citizens; those who subscribe to the trickle-down theory of economics that says leaving money in the hands of the wealthy leads to investment that benefits all.
The simple rejoinder would be to declare “hogwash” and be done with it. But we’ll provide a more thoughtful answer.
As for taxes, I find the “no new taxes” creed of legislative Republicans to be partly annoying and partly absurd. Clinging to ideology at the expense of thoughtfulness is not leadership, it is governmental malpractice. Maybe new taxes are not necessary, but they warrant discussion rather than intransigence.
As for a tax that hits the wealthy, Washington has no income tax and a revenue system that some claim is the most regressive in the nation.
And as for trickle-down economics, Republicans’ sad devotion to that ancient religion has not helped them conjure up an effective economic policy. See? You can paraphrase a “Star Wars” quote for any occasion.
If a capital-gains tax charged 5 percent on investment income over $50,000, that means a couple that earns $150,000 from investments will pay $5,000 to the state in taxes on that windfall; a couple that earns $500,000 from investments would pay $22,500.
Is that fair? I don’t know; I am loathe to use the “fairness” standard in discussions about taxes. Who is to say what’s fair when you’re talking about somebody else’s money? If you ask me, “fair” would be a law saying that journalists don’t have to pay taxes, but that’s just me.
Yet the proposal does seem reasonable. And it does seem appropriately restrained. And it does seem as though it would be beneficial to Washington residents.
And when the discussion turns to taxes, those answers are more important than ideology.
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