(The Center Square) – Last month, outgoing Washington state Gov. Jay Inslee proposed a 1% tax on an individual’s wealth above $100 million as part of a plan to plug a projected budget shortfall of between $10 billion and $16 billion, depending on who you ask.
“We have proposed what I call a very modest tax on incomes of extraordinary amounts,” Inslee said at a Dec. 17 press conference where he rolled out his proposed state operating budget. “I am proposing a new wealth tax and over four years under this proposal, the wealth tax would generate about $10.3 billion.”
The governor continued: “There are just over 3,000 wealthy Washingtonians who fit into this criteria.”
Washington State Republican Party Chair Jim Walsh, who also serves as a state representative from Aberdeen, told The Center Square he doesn’t believe Inslee is serious about a wealth tax.
“It’s an insult to the incoming governor,” Walsh said. “It’s like Inslee is dropping a turd in the punchbowl and leaving it for the next guy. It’s typical of Inslee and it’s poorly thought out.”
State Attorney General Bob Ferguson will be sworn in as Washington’s next governor on Jan. 15.
Walsh went on to reference a November report from the Washington State Department of Revenue, which noted the administrative challenges and potential legal hurdles of a wealth tax.
Such stumbling blocks are nothing new.
According to the Tax Foundation, many developed countries have repealed their net wealth taxes in recent years for various reasons.
“They raise little revenue, create high administrative costs, and induce an outflow of wealthy individuals and their money,” according to the Tax Foundation. “Many policymakers have also recognized that high taxes on capital and wealth damage economic growth.”
Walsh doesn’t think Inslee’s proposed wealth tax will get very far during the 105-day legislative session, which starts on Jan. 13.
“There are going to be lawsuits even if it is passed into law,” he said. “It’s just such a bad idea.”
Walsh predicted Ferguson would ditch the wealth tax and shift the focus to other potential taxes.
“They will try to expand the capital gains tax,” Walsh said. “We know they’ve got bills that lower the threshold to either $50,000 or $15,000, in which case, as we’ve said all along, the real target is not Jeff Bezos and Bill Gates; the real target is the middle class.”
Washington’s capital gains tax levies a 7% charge on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets over $250,000.
“If you lower that capital gains threshold to $15,000, you’re talking about regular working people who’ve got some money in the bank or maybe some money invested or maybe a rental home,” Walsh explained. “If you lower the threshold that much, you’re going to impact middle-class people.”
Ferguson is more circumspect when it comes to new and higher taxes.
“Governor-elect Ferguson is currently exclusively focused on identifying cost-savings and efficiencies to address the budget shortfall,” Ferguson spokesperson Bayley Burgess emailed The Center Square on Friday. “He will not be considering new revenue until the completion of that important exercise.”