Jason Mercier of the Washington Policy Center believes it seems the tax love in Washington knows only one direction, to infinity and beyond
Washington Policy Center
There are several tax increase bills up for a public hearing today. Among the concerns on the bills are the constitutionality of several of them and the unwise race to have the highest death tax rates in the country.
- The state’s bipartisan Tax Structure work group did not include this proposal in its recommendations to lawmakers. “Participants expressed concerns that a wealth tax would not be a stable tax base given how easily billionaires can leave the state.”
- This concern is among the reasons France repealed its wealth tax in 2017. French President Emmanuel Macron said this about why the wealth tax was repealed: “My predecessor taxed the wealthiest and those who succeeded like never before. What happened? They left.”
- There is also a constitutional concern with the way the wealth tax may be structured in Washington. According to the state’s Department of Revenue (DOR): “There is litigation risk that the courts would invalidate the wealth tax on the grounds that it is a property tax that conflicts with the uniformity provisions…”
- And of course, the new wealth tax has a referendum-killing emergency clause: “This act is necessary for the support of the state government and its existing public institutions.”
- HJR 4205 would repeal the uniformity clause in the constitution that requires property to be taxed the same. Supporters of the Senate companion (SJR 8206) stated in public testimony that removing the uniformity clause is necessary so that lawmakers can “disincentiviz(e) certain types of property ownership.”
- Sen. Frame also acknowledged during questions on the Senate companion bill that repealing the uniformity clause would open the door to a graduated income tax but said she doesn’t see that as a concern since no one is proposing that type of tax (15:00 min mark of hearing).
- Repealing the uniformity clause opens the door to not only a graduated income tax and wealth tax, but also a split roll and other types of discriminatory tax policy that treats taxpayers and property differently instead of uniformly.
Next up is the proposal to impose the highest top death tax rate in the country (HB 1795):
- As noted by Benjamin Franklin, “in this world, nothing is certain except death and taxes.” For some taxpayers in just a few states, that quote can be changed to include taxes for dying as well. Washington is one of just 12 states that impose an estate tax (commonly referred to as a death tax) and is the only state without a personal income tax to have one.
- Washington is currently tied with Hawaii for the highest top death tax rate in the country at 20%. HB 1795 would massively increase that top tax rate to 40% while adding more tax brackets.
- HB 1484, however, would simply fix a major problem with our current death tax by restoring an operable inflation index to avoid capturing more taxpayers than intended.
- Since 2014, approximately 75% of taxpayers that paid the state’s death tax were for estates valued at less than $5 million according to data from the Department of Revenue. With no functional death tax index for inflation, coupled with increasing property values, that number is likely to grow to capture even more taxpayers than was envisioned under the original law.
The final tax increase proposal on the Valentine’s Day agenda is to increase the local property tax rate growth factor from 1% to 3% (SB 5618).
Not on today’s tax agenda, however, are any bills to provide broad-based tax relief. It seems the tax love in Washington knows only one direction, to infinity and beyond.
Jason Mercier is the director of the Center for Government Reform at the Washington Policy Center.
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