Governor’s budget wisely avoids capital gains income tax



Washington Policy Center

Though there are concerns with Gov. Inslee’s recent 2018 supplemental budget proposal (spending from reserves and undefined carbon tax), there was also an early Christmas present for those wanting to avoid a constitutional fight – no capital gains income tax. The governor rejecting use of a capital gains income tax for his budget was a bit of a surprise since he has strongly supported one in the past (despite repeatedly saying he is opposed to an income tax). When asked why he wasn’t again proposing a capital gains income tax the governor said:

“I have not proposed it in this budget. We have found a way to do this in a different way that I believe responds to, as I’ve indicated, both to the needs of the education of our children and their long-term health.”

Perhaps the governor has finally seen the light and decided it is time to embrace what other state officials call one of Washington’s “competitive advantages” – no state income tax (including on capital gains). This fact was recently pitched to Amazon concerning its HQ2:

“Our advantages include … No personal income tax, no tax on interest, dividends or capital gains, and low corporate taxes.”

Based on Congress approving the federal tax reform bill yesterday, this competitive advantage will become even stronger as taxpayers and businesses in high tax states look for relief. As reported by the Pew Charitable Trust:

“Tax filers in 19 states and D.C. claim, on average, more than the Tax Cuts and Jobs Act’s cap on SALT deductions.”

Already one of those states (Maryland) has announced plans to reduce its state tax burden in response to the federal tax reform.

With the governor apparently deciding it’s time to fully embrace our competitive advantage of no income tax (including on capital gains), now is the time to market Washington to those looking for relief from states with income taxes.

Jason Mercier is Director for the Center for Government Reform with the Washington Policy Center