The following editorial originally appeared in The Seattle Times:
Wednesday’s good-news state revenue forecast says Washington has enough money to provide necessary government services critical to the pandemic recovery. The Legislature should accept this evidence the state is on strong fiscal footing without a capital gains tax.
Revenues are up $3.2 billion over expectations for the four-year period ending in June 2023. The feared cataclysmic shortfall from COVID-19 never materialized. The 2021-23 budget can be written without deep cuts.
With federal stimulus money also arriving, Washington can begin paying for urgent work to create jobs, such as wildfire prevention and transportation, as well as social services needs worsened by the pandemic. While the state budget is in good shape, families are hurting. From February 2020 to February 2021, state figures show Washington lost 144,500 jobs. The focus should be on helping the people affected.
“We have a little bit of time and a little bit more resources than we anticipated to plan out a strategic recovery for the whole state,” lead Senate budget writer Christine Rolfes, D-Bainbridge Island, said when the forecast was released.
She’s right. And that includes not raising unnecessary taxes. The Office of Financial Management assessment that projections are “back to pre-pandemic levels” is a strong reason to pause a new tax that could hobble the long-term economy.
Now before the House, the capital gains tax passed the Senate 25-24 March 6. It would levy a 7 percent tax on profits of more than $250,000 from selling stocks, bonds and other assets, with exemptions for real estate, retirement accounts and agriculture. About 16,000 to 18,000 residents would have to pay it, according to Senate Democrats. It could provide an incentive for the wealthy to move out of state – and likely take businesses with them.
This is a serious tax. Even at its current threshold, Senate Bill 5096 would bring the state an estimated $500 million a year. Supporters have thin justifications for imposing it, so the proposal ought to be tossed out.
The revenue projections swamp any argument the state needs the money now.
House finance Chair Noel Frame, D-Seattle, said the bill is connected to funding House Bill 1213 to expand child care and early education, and House Bill 1297, which expands tax credits for a working families tax. But, clearly, Wednesday’s announcement shows the state has enough money already.
Advocates for SB 5096 say it’s needed because the wealthy pay an inequitably light share of taxes. The Legislature has commissioned a comprehensive study of Washington’s tax system and possible reforms. That study should inform any significant reform. Its proposals are due to arrive at the end of 2022.
The state’s financial outlook is promising, not dire.
The House should shelve SB 5096 entirely.