Washington’s Easter Basket Filled With Ridiculous Tax Increases

As many around our state celebrated the Easter holiday on Sunday, Democrats in the state legislature voted to move forward a staggering amount of tax increases.  We've kept you up to date on the revenue issues the majority party claims we are facing.  You can argue whether those challenges are self imposed or not, but depending on certain outcomes, the deficit could range wildly.

What has transpired over the course of this legislative session has little to do with addressing the "deficit" and more about continuing to floor the gas pedal on revenue.  While the majority party doesn't want to say the quiet part out loud...their action speak significantly louder than their words.  Here are some of the increases that passed on Easter Sunday, while you weren't paying attention to the legislature and enjoying time with your families.

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Senate Bill 5814

This one is a sales-tax increase on certain services, including computing and IT services, temporary staffing and security services. It also taxes products that contain nicotine, such as Zyn, the same as traditional tobacco products. It is projected to bring in about $2.1 billion a year in new sales-tax revenue. 

That's IF sales of those products stay at their current pace and don't decline.  The Senate passed SB 5814 on a 27-22 vote, with three Democrats joining the 19 Republicans in voting “no.”  

Senate Bill 5794

This places a B&O (business and occupation) tax on self-storage rentals and increase taxes on a number of other unrelated business activities. It passed the Senate 26-22.  State Senator Mark Schoesler (R 9th District, Ritzville) had this to say about the impacts of the tax

 Imposing a B&O tax on self-storage rentals means that those renting these spaces will have to pay the higher costs because the storage-rental owners will just pass along the tax to their customers. This proposal will especially affect lower-income people who need to rent these storage spaces.  Each of the tax increases in this bill is going to trickle down to consumers one way or another.”

Senate Bill 5813

This one jacks up the capital gains and estate tax rates.  The current capital-gains tax is 7% on gains over $250,000. SB 5813 ups the rate to 9.9% on gains over $1 million. The only states with a higher maximum rate are California, New Jersey and New York, as well as the District of Columbia. The estate-tax threshold from $2.2 million to $3 million, and its maximum rate would be increased from 20% to 35%. The Senate passed SB 5813 on a 27-21 vote.  

The problem with tying so much revenue to capital gains is it's volatility.  Year two of capital gains collections in Washington dropped nearly in half from year one.  Much of that had to do with Jeff Bezos moving to Florida and Fisher Investments relocating to Texas.  They claim it will go to education...sure it will.  Last but not least...

Senate Bill 5797

The Mt. Olympus of taxes for the majority party is the wealth tax.  This bill would establish just that.  They project it will bring in $100 million if passed.  While it doesn't sound like much (the tax would be 34 cents on every $1,000 over $50 million in assets), the real goal is to get this passed so they can increase the rate to what they really want.  that rate is $10 on every $1,000 which would then generate about $12 billion in revenue...until people with wealth move.

The total projected revenue (and increased burden on the back of taxpayers) is $18.5 billion over the next four years.  If all of these bills are included in the reconciled budget it will be interesting to see what Governor Ferguson does with his pen.