22 ms·
Washington state approves capital gains tax
- theandrewbailey 5y agoWashington state, not DC.
- PragmaticPulp 5y agoDetails are sparse in this article. Looks like 7% capital gains tax, first $250K excluded, real estate excluded. Proceeds to primarily fund childhood education (for now). > For example, stock sales higher than $250,000 would be taxed at 7%. Real estate would not be. 7% (on top of federal cap gains, which are also increasing) is a significant tax rate to start with. If it was 1-2%, I could see people rolling with it. At a whopping 7%, I expect a lot of startup founders and small business owners looking for an exit will be moving across the border to Portland right before they sell their companies.
- BadCookie 5y agoThey will move to Oregon so that they can pay 9.9% instead?
- grumpitron 5y agoIt looks like Oregon has a 9.9% capital gains tax, so moving to Portland would add to the tax bill of founders relocating before selling their company instead of reducing it.
- danans 5y agoOregon also has a state income tax, unlike Washington.
- lotsofpulp 5y agoWashington currently has 0.4% income tax for W2 employees, and another 0.6% coming on Jan 1, 2022 unless you have sufficient long term disability insurance by Jul 2021 to be able to opt out of it. So WA will effectively have a 1% income tax beginning Jan 1, 2022 for W2 earners (aka employees).
- licyeus 5y agoSearched for and couldn't find the 0.4% tax, which tax are you referring to? And for others, the incoming 2022 tax is a 0.58% payroll tax. From WA directly: "Washington state does not have a personal or corporate income tax." [1] 1 - https://dor.wa.gov/taxes-rates/income-tax https://dor.wa.gov/taxes-rates/income-tax
- lotsofpulp 5y agohttps://paidleave.wa.gov/estimate-your-paid-leave-payments/ https://paidleave.wa.gov/estimate-your-paid-leave-payments/ Washington can claim it does not have an income tax (for the purposes of subverting the state’s constitution forbidding it), but I do not see how money deducted from your income by government mandate is not a tax.
- foobiekr 5y agoOregon treats capital gains as regular income (so do most states, including CA). Oregon also has one of the worst tax regimes in the country. For most earners, a resident of a state like CA without sales tax on groceries, medical care, or medical necessities will end up with a substantially lower tax burden than a similar earner in Oregon. To be more taxed than CA is crazy.
- deleted 5y ago[deleted]
- decremental 5y agoI doubt any business owners are thinking about moving to Portland.
- Relys 5y agoWhen I lived there a few years ago, there was an increasing amount of tech companies from Seattle opening up offices in Portland.
- BuyMyBitcoins 5y agoWith all the sustained civil unrest and property destruction I’d steer clear of Portland if I wanted to open an office.
- lawnchair_larry 5y agoIt has changed a lot with antifa having free reign for the last year. Lots of businesses boarded up and leaving. Even the Apple store was just set on fire again.
- whydoibother 5y agoSomehow, I imagine you aren't in Portland or haven't spent a lot of time downtown. You are regurgitating right talking points.
- decremental 5y agoIt's not exactly a secret what's going on there. While I doubt the place is on fire 24/7, the substantial damage sustained to local businesses cannot be denied. It would be difficult to convince someone who was thinking critically about moving their business there that all is well now and going forward.
- smolder 5y agoIt's not a secret that the majority of the country has been dragged down into believing political fiction of some sort or another as fact by the relentless partisan propaganda. I'm sure many more people on the right were whipped into anger by the supposed $23 million in protest related losses than will ever read this: https://www.oregonlive.com/portland/2020/07/coronavirus-closures-inflated-23-million-reported-in-downtown-portland-protest-damages.html https://www.oregonlive.com/portland/2020/07/coronavirus-clos...
- verst 5y agoThe first 250k in profits from capital gains are exempt. It is estimated that this tax only affects the 7000 richest individuals in Washington. Keep in mind we don't have any income taxes here.
- giantg2 5y ago"Keep in mind we don't have any income taxes here." That's not really what the supporters of this bill think. They claim an excise type tax already exists and that it provides precedent for this one since income taxes are unconstitutional.
- xxpor 5y agoIncome taxes are not unconstitutional. Progressive income taxes are. No one wants to impose a flat income tax though.
- giantg2 5y agoThanks for bringing that up. It looks like local income taxes are not allowed under law and that any tax at the state level has to be flat. It seems the article may have misrepresented that with "Income taxes are unconstitutional in Washington state.". (Unless there's some obscure case law regarding flat income taxes)
- AnimalMuppet 5y agoSo, this is a tax on certain kinds of income rather than all income. And it exempts the first $250K, so it's a progressive tax. So...
- giantg2 5y agoI wonder if the courts care though. The B&O tax applies at different rates for different business types. The class of property taxed should be gross business receipts, but it seemed the courts are ok with the rates varying by business type.
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- spaetzleesser 5y agoI like that a certain amount is excluded but I don’t like exemptions for real estate. It should be treated like any other investment.
- deleted 5y ago[deleted]
- leipert 5y agoMeanwhile we have 25% capital gains tax in Germany.
- darawk 5y agoThis is just the state rate. The current federal rate is 20%, and is about to rise to 43%. So, the full tax rate on capital gains in WA is 27% and going to be 50%.
- loeg 5y ago> At a whopping 7%, I expect a lot of startup founders and small business owners looking for an exit will be moving across the border to Portland right before they sell their companies. Why? Oregon has income tax of 9-10% on all income over $9k/year.
- politician 5y ago> 7% capital gains tax It makes sense to start the out-migration now ahead of the Cascadia Megathrust Earthquake that's overdue to destroy the region and make millions homeless.
- monkeynotes 5y ago> overdue The margins of 'overdue' are hundreds of years.
- tclancy 5y agoRemind me to go to the library!
- egberts1 5y agoProceeds to fund child education. Like the state gas tax, you still won’t get itemization of its breakdown to ensure that it is really where it is going to go. So, color me surprise.
- jedmeyers 5y agoIf you are against the bill - you are against child education. It's that easy. And stop asking questions.
- giantg2 5y agoNot sure if this is sarcasm...
- braunshedd 5y agoDefinitely sarcasm with 'And stop asking questions.'
- egberts1 5y agoiT’s dEfInItElY SarCaSm! so vote the grand-comment up!
- BuyMyBitcoins 5y agoIt seems like almost every new kind of taxation gets pushed as something to fund education. For example, I was recently looking at buying a used car from a private seller and it turns out I have to pay a state sales tax on the purchase. Why? Well that specific tax was passed decades ago to fund state schools. Does the money still go to the schools? I have no clue but maybe not since the state is still considering hiking taxes to pay for more education.
- pjc50 5y agoHypothetication of taxes is never a good idea anyway.
- xxpor 5y agoIf you have any inkling the gas tax is going somewhere it isn't supposed to you're free to file a PDR.
- hahaxdxd123 5y agoAh, so this bill will tax gains from productive activities like investing in and building companies, while exempting gains from rent seeking activities like real estate. Why am I not surprised?
- bestcoder69 5y agoMaybe they’re promoting productive investments in real estate, while punishing people for rent seeking off of companies just because they fronted the capital.
- bpodgursky 5y agoYou know that most real estate investing is like... buying land and extracting literal rent, right? This is a bizarre take.
- sokoloff 5y agoThough they do literally seek rent from their tenants, landlords who provide housing (or commercial real-estate) are not rent-seeking in the economic sense of that phrase, which is to seek to improve your economic position without creating any benefits for others. Providing housing or office space is clearly creating benefit for others.
- whydoibother 5y agoNo, they don't. Landlords are complete drains on society. They don't 'provide' housing. They limit supply and drive up costs for everyone else.
- sokoloff 5y agoFor multiple periods spanning over two decades in my life, I greatly appreciated the opportunity to live indoors without having to first purchase a house or apartment where I wanted to live.
- temp667 5y agoWhy exempt real estate?
- sickygnar 5y agoWhy is real estate always exempt from this stuff? Is there a good reason or is the special interest just large?
- bestcoder69 5y agoNon-pessimistic answer: it’s largely the only place the middle class parks its wealth. Besides that it would be stuff like 401k and Roth IRA which would also be exempt already. Pessimistic answer: it’s for developers and landlords
- majormajor 5y agoYes, if you included real estate at the 250K number, you'd hit a much broader target than you would for stocks. But eliminating real estate entirely is a huge break for rent-seeking large landlords and developers. Probably should've simply chosen a higher dollar threshold for real estate.
- giantg2 5y agoThey probably don't want the tax inflating real estate prices. Those rental owners will just pass the cost on to renters.
- gnopgnip 5y agoThe tax applying to real estate would drive down real estate prices, making investing in stocks and other alternatives more profitable.
- giantg2 5y agoThat might work if this were a property tax. That would only for prices though, and that annual tax would still be passed in to renters. The real estate tax they are talking about here applies to the net gain when you sell a property. People price things for what value they want to get out of them (and what the buyer is willing to pay). If you have a 7% tax on profit from a home sale (or appartment building) theybwill be priced higher to make up for it. That cost will be put on the renter in the form of slightly higher rent to cover the owners mortgage or target return.
- zacharycohn 5y agoAs a Washington resident, I think this is great. WA has one of the most regressive tax systems in the country, and this is a move in the right direction. It's crafted to have a very narrow impact. It is capital gains, but essentially only for stock sales, and only for stocks sales over a quarter million dollars. If someone sells half a million dollars worth of stock, it seems very fair the state gets some cut of that - especially if it's earmarked for childhood education. I can only hope I'm successful enough to one day pay this tax.
- swsieber 5y ago> especially if it's earmarked for childhood education. If it's earmarked for childhood education then don't be surprised if other childhood education funds are reallocated elsewhere.
- xxpor 5y agoThey won't be in WA. They've been underfunding education for years and are under a state Supreme Court mandate to increase funding. I'm not 100% sure that's still in effect but my property taxes nearly doubled 2017->2018.
- mjparrott 5y agoHaha yes ... earmarking funds for noble causes is the ultimate fake out. Lottery money all goes to noble causes right, right?
- cmckn 5y agoDepends on your state, but I guarantee the information is available to you. You can ask your state representative for more information if you're curious. Here's the 2020 financial report for WA's lottery: https://walottery.com/About/assets/docs/20AnnualReport.pdf https://walottery.com/About/assets/docs/20AnnualReport.pdf Page 31 is probably what you're looking for. The majority of payments ($141 million) went to the Washington Opportunity Pathways Account, relevant statute here: https://app.leg.wa.gov/RCW/default.aspx?cite=28B.76.526 https://app.leg.wa.gov/RCW/default.aspx?cite=28B.76.526
- bpodgursky 5y agoFWIW, it's going to be immediately challenged in court. WA supreme court has struck down all income taxes in the past, and it's pretty unclear whether this one will pass muster.
- lotsofpulp 5y agoYet all WA W2 employees pay 0.4% of their income towards family leave insurance, aka an income tax. And an additional 0.6% is being added Jan 1, 2022 for long term disability insurance, also an income tax. Especially considering the long term disability benefit is pathetic for 0.6% of pay. If you earn more than ~$60k, you’ll be paying more for the LTDI tax than simply buying the same policy from an insurance company. The fact that the WA Supreme Court hasn’t struck these two down as income taxes when they clearly are makes me think they are going to let this slide too.
- quotemstr 5y agoThe WA constitution prohibits non-uniform income taxes, not all income taxes.
- leephillips 5y agoI recently came across this comment by Philip Greenspun: “if you bought an asset for $10,000 in 2000, for example, the BLS says you spent $15,700 in today’s mini-dollars; if you sell it for $15,000 in 2021 you’ve actually suffered a loss, but will owe capital gains tax nonetheless” (https://philip.greenspun.com/blog/2021/04/29/economic-wisdom-from-mit-david-autor/ https://philip.greenspun.com/blog/2021/04/29/economic-wisdom...). I’m not a finance person, and this had never occurred to me. Does he have a point? Should the calculation of capital gains take inflation into account?
- BuyMyBitcoins 5y agoIt would be great for the taxpayer if you could do that but the government would lose out on so much revenue. So I think any such proposal is dead on arrival.
- Consultant32452 5y agoI think it’s important to recognize that taxes are not primarily about revenue. The government can just create/inflate as much money into existence as it wants. All taxes are about behavior control and signaling. We’re either trying to discourage a behavior or signal we’re sticking it to some group or other who is getting taxed. Once you see the world through this lens all of these tax laws make much more sense.
- syshum 5y agoI think it is important to recognize that taxes when used for anything other then revenue are highly unethical and should be opposed by the population
- evo 5y agoI feel like they're one of the only tools we have collectively as a society to counteract "tragedy of the commons"/negative externality situations. Is a tax that brings the financial costs of an action in line with its distributed societal costs that unethical?
- medium_burrito 5y agoThe people behind the tax already have a friendly challenge lawsuit ready. Odds are among lawyers in this state that that the court will let the tax stand, unfortunately. The best part is this tax basically is a trojan horse. In it's present form it'll raise a small amount of money- $400M. Originally it was supposed to be a much lower threshold- ~10$k if I remember right. So it'll be ratcheted down of course.
- mjparrott 5y agoThank goodness we have states with different policies so you have some ability to move if you don't like the tax policy of your state. Obviously many can't.
- seattle_spring 5y agoFor those that support this, I have a question: Combined with the federal tax changes, this may increase LTCG rates for Washington residents to more than 60%. I can see folks wanting this for people that regularly make more than a million a year, but what about the situation more common amongst this community where you take below-market pay in exchange for a potential lump payout in one year. For example, say a startup employee works somewhere for 6 years. They reach a moderately successful exit and realize $1.2m all at once. Do you feel it's fair they lose more than half of at least some of that money to taxes, even though if they would have realized it equally over those 6 years they would have paid far less in taxes?
- rkevingibson 5y agoNot sure how you arrived at 60% - aren't federal capital gains topped off at 20%, and this bill only 7% for gains over $250,000? Even if it is 60%, I think that's reasonable. In your case, why is the employee selling all of their stock in one year? If they sell over multiple years, they could get gains of up to $250,000 without paying any state tax, which is plenty. I'd also be in favor of a state income tax, since the sales tax regime in Washington is very regressive.
- seattle_spring 5y ago> Not sure how you arrived at 60% - aren't federal capital gains topped off at 20%, and this bill only 7% for gains over $250,000? They are this year, but the Biden proposal wants to raise tax for any income over $1m (LTCG included) to the top marginal rate of 39.6%. Add that to the proposals to increase SS to 12% for income over $400k, ~3% medicare tax, etc. > why is the employee selling all of their stock in one year? Because having all of your net worth in one company is a huge risk, and anyone wanting to mitigate risk would want to diversify as soon as possible.
- vineyardmike 5y agoRisk mitigation isn’t free. It’s 7% now.
- clairity 5y agothese are exactly the kind of tax structures that just beg to be gamed by the wealthy. instead, there should be no cutoff at all, and especially no exemptions for real estate, much of which is unproductive rent-seeking. the tax should be a smooth function with positive slope, not a discontinuous one with carve-outs. combined with lowering taxes elsewhere, it would encourage broader investment rather than hoarding, especially with so much excess capital sloshing around looking for returns. it actually helps an economy to principally tax this excess capital and unproductive rent-seeking behaviors, allowing an economy to cull unproductive investments in favor of productive ones.
- mattmcknight 5y ago>"it would encourage broader investment rather than hoarding" why do you think a tax on investing would encourage investment? It would encourage not selling your investments, or investing in investments which don't produce capital gains, which tends to look like hoarding.
- clairity 5y agoinvestment happens when you have positive-npv projects to invest in, regardless of tax rate (and a smooth, even tax squeezes out distortions that might otherwise redirect investment into unproductive assets). a tax might affect investments at the margin, but not in an environment where there is excess capital looking for return (e.g., the current stock market).
- mattmcknight 5y agoIt still seems like a higher capital gains tax will discourage some investment in things, to the extent the NPV changes versus other investments that don't incur that tax.
- clairity 5y agoyah, that’s the investment at the margin, but that’s currently overwhelmed by excess capital looking for any returns, even net negative, as long as it’s less negative than the next best alternative. excess capital decouples the risk-reward relationship. that’s why it makes the most economic sense to tax it back into line (and not other things), leaving money in the hands of spenders & more constrained investors to direct the market back to productivity, rather than extraction (for no good economic reason).
- ggreer 5y agoThere are several issues with this tax. First, the ultra-rich won't pay it. They'll take out loans against their stock instead of selling it. Second: The 14th amendment to the state constitution[1] says: > All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word "property" as used herein shall mean and include everything, whether tangible or intangible, subject to ownership. This bans any sort of graduated tax. The state supreme court has upheld this in the past.[2] If the legislature wants to make a graduated tax on capital gains, they'll have to amend the constitution. Third: This tax is counterproductive. If you tax something, you get less of it. Tax cigarettes and people smoke less. Tax alcohol and people drink less. Tax gasoline and people burn less gas. Tax gambling and people gamble less. And if you tax capital gains, then people invest less. If you're going to tax something, tax bad or neutral things, not good things. This tax won't ruin the state's economy, but it certainly won't help economic growth. 1. https://leg.wa.gov/CodeReviser/RCWArchive/Documents/2019/WA%20Constitution.pdf https://leg.wa.gov/CodeReviser/RCWArchive/Documents/2019/WA%... (Amendment 14 is on page 59) 2. http://courts.mrsc.org/supreme/039wn2d/039wn2d0191.htm http://courts.mrsc.org/supreme/039wn2d/039wn2d0191.htm
- skeeter2020 5y ago3b. If want to minimize decision-influencing impacts of the tax make it as broad-based as possible, ex: a consumption tax with no exceptions.
- ac29 5y agoI dont buy that this tax will meaningfully reduce investment. With interest rates on bank accounts and and bonds so low, there really is no way to keep up with even relatively low levels of inflation without investing in stocks. People aren't stupid, they aren't going to make investments with a 0.5% rate of return just to spite the state.
- _rpd 5y agoWill likely be ruled unconstitutional under WA state constitution: https://www.washingtonpolicy.org/publications/detail/lawmakers-wanted-an-income-tax-lawsuit-theyll-get-two https://www.washingtonpolicy.org/publications/detail/lawmake...
- bruiseralmighty 5y agoActual nonsense coming out of this government. As a life-long resident one of the main reasons I continue to work in Washington is the lack of an income tax. Exempting real estate is just an extra middle-finger to anyone young and trying to save. This is so painful and short-sighted. Earmarking for education is yet another typical smoke and mirrors 'saint-hood' performance that this government puts on for its low-info voter base. If all of that money can still be proven to be going towards childhood education by 2023, I'll deep-fry my socks and eat them. Hopefully we can get a State Supreme Court judge to knock this down as unconstitutional.
- triceratops 5y ago> anyone young and trying to save It says the first $250k is exempt. Not a lot of young savers pulling down $250k in cap gains annually.
- kerng 5y agoIt only kicks in after 250k in capital gains for the given year - doubt this will hurt anyone. If you make that much passively via capital gains, you are already very well off.
- nojvek 5y agoThis is going to make house prices shoot even higher. They tax stock sales but not real estate. Real estate has another loop where the first 250k gain (not sure exact number) from sell of private residence isn’t taxed. So people have one house for husband, one for their wife. When you own a house and live it in for more than an year, that can be marked as primary residence. Also mortgage interest is deductible. In so many ways housing comes out as a good investment due to tax savings. Since it’s supply is limited, it becomes a frenzy driving sky high prices. If we want to fix housing costs in Washington, we ought to address the tax incentives. Housing should be seen as a place to live, not an asset to hold. I can’t even imagine how youngsters nowadays can even afford a single family home. A decent 3-4 bedroom is now 1M+, it’s kind of crazy.
- CryptoPunk 5y agoNot only does a tax hike like this redirect capital from individuals working in the market, for consumers, to those working in the state-directed-sectors of the economy, for political leaders, very likely leading to a less efficient allocation of capital, it also: Discourages productivity for residents of the jurisdiction and capital accumulation within the jurisduction, by reducing the reward for socially beneficial activity, like training and saving/investing money, that improves marketable skills and increases personal wealth, respectively.