Gov. Jay Inslee is proposing $5.5 billion in new taxes, including imposing a state tax on capital gains, an increase in the B&O tax and a carbon tax on using energy. None of this is necessary.
OUR state has a tax system that favors growth, investment and opportunity. We have no income tax on personal income, employee stock ownership or capital gains. Compared to other states, our smarter approach favors forward-looking innovation and investment that creates more job opportunities for people in our state. It also enables personal-income growth that encourages consumer consumption and fuels sales-tax revenue increases to fund state services, local governments and schools. For example, recent tax-revenue growth funded increases in K-12 educations spending of almost 33 percent from approximately $9,500 to $12,500 per pupil the past six years.
Further proof our current system expands opportunities is the $10.1 billion, or 35 percent overall increase in state tax revenues the past six years (from $28.6 billion to $38.7 billion in biennial revenue). Those six years are the period since Washingtonians rejected a state income tax. And now, with a projected $5.6 billion increase the next four years, the state will have $44.3 billion or $15.7 billion more to spend in the 2019 budget than in the 2009 budget.
Yet politicians, including our Gov. Jay Inslee, are claiming we need new taxes and tax increases to meet our budgetary needs. Lawmakers need to be both transparent about the actual tax-revenue increases we have already enjoyed and strategic in prioritizing the most important investments in order to provide for our communities and keep our state’s economic flywheel growing.
I have seen firsthand how attracting talent, capital and expertise have helped many startups succeed in Washington state. And this success creates a virtuous cycle. For example, Microsoft is a global leader in software, cloud computing, gaming and more. Companies like RealNetworks were founded by Microsoft employees and then RealNetworks employees founded Isilon Systems. All these companies went public and created countless jobs and opportunities for Washingtonians. More recently, former Isilon employees have founded companies like Qumulo and Igneous, hiring hundreds and building products to be among the next generation of contributors to our growing economy.
In late 2010, as we emerged from the recession, the voters of Washington were offered a choice about whether to give up our state’s advantage of having no income tax. Advocates of Initiative 1098 said imposing a state income tax was essential to generating more tax revenue, primarily to fund education. Opponents said an income tax would hurt economic growth and ultimately lead to less resources for important priorities like education, human services and public infrastructure. Washington voters expressed an overwhelming confidence in the ability of entrepreneurs, employees and investors to grow the economy, and they rejected a state income tax by 64 percent of voters.
It turned out opponents of a state income tax were right. As mentioned, tax revenues have increased more than $10 billion and spending on public education increased by more than $3,000 per student since then. Also, Amazon.com and Microsoft became two of the most valuable companies in the world and continue to attract talent, professional opportunities and a stronger economic base to our region. Finally, more than 100 technology companies based outside the region have established or substantially grown their Washington operations these past six years to leverage our state’s talent, insight and more attractive tax system.
During his re-election campaign, Gov. Inslee appeared to understand that our economy would be harmed by new taxes. But, with the election over, he is proposing $5.5 billion in new taxes, including imposing a state tax on capital gains, an increase in the B&O tax and a carbon tax on using energy.
None of this is necessary. The state’s own economists project an additional $5.6 billion in tax revenues for the 2019-2021 budget without the need for new taxes. This leaves plenty of room for budget writers to further increase public spending on education, research, human services, ports and roads, without increasing the financial burden the state places on families, businesses and investors.
As we reflect on the magnitude of the increased state tax revenues, we should be thankful for the choices Washingtonians have made in the past around defeating an income tax. With our state’s balanced tax system, state revenues have increased almost every year. History shows that our smart growth and consumption-orientated tax system, when combined with intelligent prioritization by legislators, keep Washington at the forefront of bold business initiatives, technical innovation and job creation. The result is not only rising revenues for the state, public schools and local governments, but the fostering of new ideas and opportunities that make the world a better place for everyone.