I didn’t want to write this.
I wanted someone else to instead – someone who is wealthy and would actually pay a capital gains tax.
So I went through my contacts and called 10 or so friends and acquaintances who I thought made enough income from investments that the capital gains tax would apply to them.
Because it’s the most important conversation happening in Olympia right now, as the Senate Republicans, House Democrats and Gov. Jay Inslee negotiate a state budget that funds public schools. Should we raise taxes on average people or ask a wealthy 0.4 percent of Washingtonians to pay their fair share for our schools?
It’s a myth that Senate Republicans refuse to entertain the notion of raising revenue. They voted to raise billions of dollars in higher gas taxes and other fees to pay for highways. They proposed raising your property taxes to pay for schools. Where they draw the line is asking the wealthiest few to pay their fair share.
So I tried to find a wealthy person to write this with me.
It isn’t that the people I called said no. In fact, everyone I spoke to was an enthusiastic supporter.
The problem? None of them would actually pay the proposed tax on investment profits, because they don’t meet the thresholds year after year.
These aren’t average, middle-class Washingtonians – they are fairly wealthy individuals. But they still aren’t some of the estimated 32,000 people who would actually pay a capital gains tax on profits from the sale of stocks, bonds and other lucrative investments. And that’s good, because my proposal is meant to help restore a little fairness to our upside-down tax system.
We need an economy that works for everyone, not just the wealthy few. In Washington’s tax system, our poorest families pay up to seven times more of their income in taxes than the wealthiest 5 percent – a system that nonpartisan groups have identified as the most unfair in the nation. And it’s a tax system that fails to generate the revenue needed to invest in our children’s education and fund the services that kids, families and seniors depend on.
House Democrats have proposed a new budget compromise that fully funds basic education for our 1 million schoolchildren, repairs our broken mental health care system, and begins to restore years of cuts to safety net services for low-income families and homeless kids. A capital gains tax is critical to allowing all of these things to happen.
But instead of tax reform to ask the wealthy few to pay a little more, Senate Republicans actually want to give about $116 million more in tax cuts to millionaires and big corporations, including tax breaks for high-tech corporations, food processors and aluminum smelters. Microsoft, ConAgra and Alcoa are some of the biggest beneficiaries. That also happens to be the same amount they are short in early learning funding compared to the House Democrats’ proposal.
The fair share tax on capital gains would assess a 5 percent tax on huge investment windfalls. For a married couple, you’d have to make $50,000 just in capital gains profits in one year to pay the tax, and as a single filer you’d have to make $25,000. Those are some of the highest thresholds and among the lowest rates in the nation, compared to the other 41 states that already have a capital gains tax.
Yes, I’ve heard the argument that a small capital gains tax would cause wealthy people to leave Washington, and it’s a red herring. If that were true, than everyone would already live in Washington, Alaska, South Dakota or one of the other nine states without a capital gains tax. And with one of the lowest rates in the nation, if people left Washington because of a new capital gains tax, they would likely only pay more wherever they moved.
Would you be affected? Probably not, because estimates tell us only about .4 percent of Washington’s 7 million residents make enough money from the stock market and other assets to pay a capital gains tax.
Still, some opponents have claimed this tax would “hurt middle class families.” That’s absolutely not true.
This tax is intended to strengthen the middle class by asking the wealthiest few to pay more of their fair share. That’s why we’ve completely exempted capital gains from all retirement accounts and all sales of primary residences. So when middle-class Washingtonians who have worked hard for 30 years to build a retirement finally retire, or go to sell the home they invested in and raised their children in, that hard-earned money isn’t touched.
Instead, we can use the revenue from this modest proposal to invest in fully funding basic education, mental health care and services for homeless kids and low-income families.
Because life isn’t about how big you can pile your stack of money, it’s about how well we care for our neighbors and invest in our kids’ future.
And remember, it’s pretty hard to make a million dollars without a good education.
State Rep. Laurie Jinkins, D-Tacoma, represents the 27th Legislative District in Olympia.