We previously highlighted how the state Department of Commerce has long used Washington’s lack of income or capital gains taxes as part of their marketing pitch to encourage businesses to come to Washington. Apparently department officials still believe having no income tax is a strong selling point.
In their marketing materials for the Paris Air Show, the department continues to stress Washington’s lack of an income tax, as well as how small the overall tax burden is compared to other states:
When it comes to making your money go as far as possible, Washington is an excellent choice. We don’t have personal or corporate income taxes…ensuring that you get to keep more of your hard earned money to expand and grow.”
Since the legislature is now considering imposing a capital gains tax, the department recently removed references to the lack of a capital gains tax from its “Choose Washington” website, and left it out of the Paris Air Show materials. But they continue to emphasize the state’s lack of an income tax.
At least the Department of Commerce is being honest in not selling businesses on something that very well could disappear by the end of the special session.
But new businesses should be aware that if the legislature approves a tax on capital gains, it will make Washington less competitive with the other eight other states that do not have an income tax; in each of those eight states there is also no tax on capital gains. Changing that would make Washington an anomaly compared to these other states.
It could also leave the legal door open to impose an income tax in Washington.
As explained in a previous WPC blog, our state’s Supreme Court has prohibited graduated, across-the-board income taxes in Washington. It would take a constitutional amendment to end that prohibition.
As Jason Mercier notes, there is some suspicion that the reason the capital gains tax is being targeted is because there are some that believe the current justices would overturn the prior case law allowing income taxes in Washington without a constitutional amendment. Supporters have been looking for a test case and this could fit the bill.
Either way, a capital gains tax, and the uncertainty it could foster for the possibility of an income tax in the future, is definitely not a selling point for doing