The Walla Walla Union-Bulletin offers lawmakers prudent counsel as the COVID-recession continues to plague the state economy: Less spending, not more taxes, is recipe for state budget.
The midst of a pandemic, which has already slowed the state’s economy, is not the right time to add to the tax bill of citizens.
But it is the right time to curb spending to ensure a balanced budget if the economy dips further. Washington’s economy has slowed because of the COVID-19 shutdown that started in March and continues today.
Many are suffering financially.
The editorial notes the significant growth in spending proposed in the governor’s budget (see our blog post here), which includes a 9% capital gains tax. The editorial board calls the tax what it is:
Inslee and Democratic leaders who control the House and Senate are itching for new taxes, including a capital-gains tax. While we believe it’s the wrong time for any tax hike or new tax, a capital-gains tax is particularly onerous as it is an income tax, which is not allowed under the state constitution.
The Washington Research Council also reviews and comments on the proposed capital gains tax.
Indeed, a capital gains tax would make Washington’s tax structure much more volatile, as we showed in a 2019 policy brief. To manage that volatility, the state would need to increase savings during boom times in order to better smooth out revenues through downturns…
As we wrote in 2019, if the bill is passed, it will certainly be challenged as an unconstitutional income tax. Thus, it should not be relied on to balance the budget.
As we’ve noted, for some, the legal challenge is a feature not a bug; they would like the state Supreme Court to use the challenge to the capital gains tax as a vehicle for overturning the long-standing ruling that a progressive income tax is unconstitutional. The WRC points out that the public continues to oppose capital gains taxes.
On top of that, a recent Crosscut/Elway poll found that just 41% of voters support a capital gains tax.
The U-B concludes:
Now is the time for a state budget that calls for prudent spending and no new taxes.
Public opinion appears to concur.