Opinion: Fact Check – Repealing the capital gains income tax will ‘devastate’ basic education. Is that true?

Paul Guppy of the Washington Policy Center points out the fact that an income tax hurts our state explains why voters, who collectively are generally smarter than public officials, have rejected it 10 times.

Paul Guppy points out the fact that an income tax hurts our state explains why voters, who collectively are generally smarter than public officials, have rejected it 10 times.

Paul Guppy
Washington Policy Center

A recent statement by the Senate Majority Leader asserts that passage of Initiative 2109, an initiative from the people to the Legislature to repeal the capital gains income tax, would “result in the loss of” money for the state. He also said the popular initiative would “reduce K-12 funding” and “devastate” funding for certain state programs.

Neither statement is true. The state will not “lose” any money if lawmakers pass Initiative 2109.

State revenue will continue to increase by billions of dollars every year under the current tax system, without the capital gains income tax.

The amount of money taken by the state has doubled in ten years (up over 100%, while CPI inflation went up 34%), and is projected to continue increasing in future years (see chart).

The same upward budget trend applies to K-12 public school spending:

K-12 spending has doubled since 2013, rising from $13.5 billion to $29 billion.
Public schools spend over $19,000 per student per year, more than tuition at most private schools.
K-12 employees are among the highest-paid public employees in the state.
As K-12 spending increased, the number of students declined. In the last few years about 46,000 families have left the system.

It comes across as arrogant and greedy to bemoan the “loss” of money the state has never received. The claim is like a business executive asking for a $50,000 bonus, getting $45,000, then complaining that she “lost” $5,000.

It would be like proposing a bill to raise a property tax increase limit from 1% to 3%, then complaining the state “lost” money because the bill didn’t pass.

It also makes lawmakers look grasping when they fail to recognize that today the people of Washington shoulder the highest public-sector financial burden in the history of the state.

Meanwhile, Center Square reports that billionaire Jeff Bezos likely moved out of state (to no-income-tax Florida) to avoid paying some $610 million in capital gains income tax. Fisher Investments also left (to no-income-tax Texas), taking some 1,800 jobs with it, for the same reason. No doubt other employers have quietly pulled out too. Washington can expect to lose more jobs and investments under this short-sighted and unpopular tax policy.

That an income tax hurts our state explains why voters, who collectively are generally smarter than public officials, have rejected it 10 times. The state income tax was rejected in 1934 (57% No), 1936 (78% No), 1938 (67% No), 1942 (66% No), 1944 (70% No), 1970 (68% No), 1973 (77% No vote), 1975 (67% No), 1982 (66% No), and 2010 (64% No).

It’s also why one of the most frequent comments one hears about government these days is, “They’re not listening to us.” Some 420,000 people signed Initiative 2109 to qualify it as a bill to send to the legislature. That’s nearly 100,000 more than were needed.

The least lawmakers could do is consider it seriously. At a minimum they should hold a public hearing, instead of brusquely dismissing it because pro-income tax lawmakers say they are worried about “losing” money the state never had to begin with.

Paul Guppy is the vice president for research at the Washington Policy Center.