Gov. Jay Inslee and his fellow Democrats are pressing the Washington Legislature to adopt a new income tax on capital gains, but before they go any further, they might want to check with their colleagues in the Connecticut General Assembly, says Sen. Phil Fortunato, R-Auburn.
A brand-new $1.8 billion budget disaster in that state is the direct result of a capital gains income tax – almost exactly like the tax Democrats are proposing here.
“We couldn’t have asked for a better-timed warning,” Fortunato observed. “Those who think an income tax on capital gains is a good idea are ignoring its volatility. Or else they understand the danger full well — and they are counting on it.
“By backing the state into a corner they might be able to force Washington to adopt a broader income tax that would hit every taxpayer in the state.”
Connecticut officials revealed April 28 that plummeting revenues from that state’s tax on capital gains income have left an enormous hole in their budget. Connecticut’s taxes are weighted toward the rich. But in 2016, the rich didn’t sell as many stocks as the state expected – so projected capital gains tax collections fell 8.9 percent. Connecticut now must raise hundreds of millions of dollars in a hurry, and flummoxed legislative leaders say they may have no choice but to raise income-tax rates for everyone.
“Democrats in Connecticut are already talking about jacking up taxes on the middle class,” Fortunato said. “Least shocking news ever.”
The budget disaster in the Nutmeg State has direct implications for Washington. This is one of just seven states that does not impose an income tax. Washington voters have repeatedly rejected an income tax, nine times since 1934, frustrating advocates of higher taxes and spending. Now Gov. Jay Inslee and his fellow Democrats are taking a different tack, proposing a narrow type of income tax, on capital gains income, and claiming that it would only affect the rich.
“That’s what they said in Connecticut, too,” Fortunato warned. “The income tax was supposed to bring stability to state government and make the rich pay more. But this crisis in Connecticut shows how foolish it is to balance your budget on a relative handful of people.
“Eventually, a downturn will turn the money spigot off. When that happens, politicians will head straight for the pockets of the little guy. That’s why I proposed a constitutional amendment to ban income taxes in this state.”
For more information:
WTNH-TV (New Haven, Conn.), April 28, 2017: Income tax revenue collapses; Malloy says taxing the rich doesn’t work
New Haven Register, May 1, 2017: Drop in income tax receipts plunge Connecticut’s budget further into deficit
Connecticut Mirror, May 2, 2017: House speaker: Deficit too great to rule out income tax hike