Bipartisan support for income tax ban amendment?
Although the 2017 Legislative Session is already breaking records for discord and contentiousness there is at least one surprise issue of growing agreement: Washington should not have an income tax.
“The voters defeated that several years ago (an income tax). We heard that loud and clear. We are not in favor of an income tax as a caucus.”
Senator Nelson is right about the consistent and overwhelming rejection by voters of an income tax with proposals creating one failing the last 9 times they've been on the ballot. In fact, a local income tax proposal in Olympia was just rejected in November - the first time in two decades a tax increase has failed in the city.
Further demonstrating the point made by Sen. Nelson are the comments during the recent election when several Democratic lawmakers also reiterated their opposition to an income tax.
Based on this near universal opposition from lawmakers for an income tax, this should mean there is enough support to help take the threat of an income tax out of the hands of five justices on the state supreme court. This could be done by sending the voters a constitutional amendment to make the state's eight decade old income tax ban court proof.
While the growing support to keep Washington income tax free is encouraging, there continues to be some confusion about whether a capital gains tax is an income tax. As described by the Tax Foundation this shouldn't be a difficult conclusion to reach - a capital gains tax is an income tax (emphasis added):
"Forty-one states tax capital gains income. In all cases, it is captured by the state’s individual income tax and not by a discrete tax on capital gains. Indeed, all states currently treat capital gains as income. Proposals to label a Washington tax as an excise on buying and selling stock, designed to elide constitutional restrictions, fall apart when one considers that the 'excise' is imposed on realized gains less losses (that is, income), and not on total share value or financial transactions . . .
Foregoing an income tax is the Washington tax system’s competitive advantage, an inducement to individuals and entrepreneurs alike. And make no mistake, a capital gains tax is a form of income tax. Every tax system has its selling point, and this is Washington’s—one that could be seriously undermined by capital gains taxation. More importantly, such a tax could undermine the very programming it is designed to fund."
The confusion about a capital gains income tax aside, let's hope lawmakers take advantage of the growing opposition to an income tax in Washington and send voters a constitutional amendment to take this debate out of the court's hands.
State should make state income-tax ban crystal clear
History of income tax votes in Washington
Tax Foundation warns against imposing capital gains income tax
Capital gains taxes are too unreliable to fund education