Washington’s big tax pump | Don Brunell

Large banks, high-end home buyers and merchants in border communities are feeling the effects.

Washington’s big tax pump | Don Brunell

With the dust settling from the 2019 legislative session, the focus is assessing the impacts on taxpayers and our economy.

Our state’s budget grew by a whopping 17.5 percent, which is one of the largest increases ever. Gov. Jay Inslee and his Democrat colleagues who controlled the legislature came to Olympia last January set on raising taxes despite higher than projected revenue collections.

“Rather than looking for cost savings, lawmakers chose to raise more than $1 billion in new taxes over the next two years and $2.5 billion over four years,” Association of Washington Business (AWB) President Kris Johnson said in a session-ending press release.

The $52.4 billion budget is nearly $8 billion more than the previous two-year spending authorization (2017-19). “It comes on the heels of double-digit growth in the previous two budgets, raising serious questions about the long-term sustainability of such spending,” Johnson concluded.

It could have been worse. Inslee’s proposals for new taxes on carbon emissions and on capital gains failed. However, large banks, high-end home buyers and merchants in border communities got clobbered.

In an end-of-session maneuver, Democrat lawmakers raised the business and occupation tax (gross receipts) on large financial institutions — those making at least $1 billion in net income per year — from 1.5 percent to 2.7 percent. Republicans argued it is illegal so it could be overturned in court.

Lawmakers also converted the flat-rate real estate excise tax (1.28 percent) into one with a graduated scale. It lowers the rate on homes selling under $500,000, but jumped the tax on those selling over $1.5 million.

That means if you are selling a home worth $500,000 this year, you’d pay $6,400 in taxes as compared to $5,500 in 2020. However, if you are selling a home for $2 million this year, you’d pay $25,600 in taxes. In 2020, the tax will be $55,000, according KREM-TV (Spokane) calculations.

Merchants in border communities are expected to see a drop in sales after the Legislature removed the sales tax exemption for out-of-state residents at the cash register.

For example, starting in January, Portland-area shoppers making a purchase in the Vancouver-area will be charged sales tax at the time of purchase. They can save their sales receipts and as long as the tax is more the $25. They can mail in their receipts and be reimbursed by mail each year.

No doubt Washington lawmakers face mounting costs for public employee and teacher pay increases and pensions, health care, education, treatment for mental illnesses and drug addiction, homelessness, public safety and fighting wildfires. But higher taxes also have consequences.

In Connecticut, for example, individuals earning more than $500,000, pay capital gains at 6.99 percent rate. Recently, according to the Wall Street Journal, Democrats who control the legislature approved the surcharge for individuals in the top income bracket. The surcharge would effectively raise the highest rate to 8.99 percent.

The result is a continued exodus of taxpayers in high-income brackets to lower taxed states such as Florida. The population flight is taking a toll on Connecticut’s economy and tax collections.

WSJ reported recently the federal Bureau of Economic Analysis found Connecticut’s GDP grew a paltry 1 percent in 2018 which is 44th in the country and the slowest in the Northeast after Rhode Island. Slow economic growth depresses tax revenue and contributed to Connecticut’s $3.7 billion budget deficit.

Our state’s GDP grew by 5.7 percent ($5.6 billion) last year thanks, in part to Microsoft, Amazon and Boeing. However, things change and our state’s economy will face rough times. That’s when full impact of the “big bump” in taxes hit businesses and families.

Don C. Brunell is a business analyst, writer and columnist. He recently retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.


Talk to us

Please share your story tips by emailing editor@courierherald.com.

To share your opinion for publication, submit a letter through our website https://www.courierherald.com/submit-letter/. Include your name, address and daytime phone number. (We’ll only publish your name and hometown.) Please keep letters to 500 words or less.

More in Business

Nickie Lynn's 22x22-foot labyrinth takes up nearly the entire floor space in her Myrtle Avenue location. Photo by Ray Miller-Still
A new ‘place for healing’ opens in heart of Enumclaw

Nickie Lynn has earned a Masters in pastoral studies and has been certified in pastoral ministry, spiritual direction, and labyrinth facilitation — all to help you on your spiritual journey.

Don Brunell
North American ports remain closed to large cruise ships | Brunell

Losing out on cruise ship season last year cost Alaska $3 billion.

Teago Manoharan on March 16 holds open the door to the Buckley Kitchen, a commissary kitchen he started in 2019 that hosts a number of bakers and chefs who couldn't otherwise afford a space to cook. Photo by Alex Bruell
Buckley Bakery builds on bold businessman’s big business plan

Teago Manoharan wants to bring a bakery to Buckley. And an app. And a restaurant. And classes.

Cash Cards Unlimited partners, left: Nick Nugwynne, right: Cassius Marsh (photo credit: Cash Cards Unlimited)
Former Seahawks player Cassius Marsh cashes in on trading cards

Marsh and his friend open physical and online trading card store as collectibles boom amid pandemic.

Teaser
First large-scale, human composting facility in the world will open in Auburn

“It’s what nature meant us to do. We just do it faster.”

Don Brunell
Keeping America’s semiconductor edge is paramount | Brunell

Semiconductors are among the U.S.’s top five exports.

Melissa Hyce is the proud owner of the new Cole Street business, Urban Junktion. Photo by Ray Miller-Still
Urban Junktion opens on Cole Street

The new business doesn’t just want to sell vintage home decor, but also teach you how to make some yourself.

Customers of the Buckley Plateau Market line up in an alley way to receive their orders. Photo courtesy Sean Shands
Plateau farmers, food producers open REKO market in Buckley

REKO markets are all about getting food fresh from the farm to your table.

Josh Sanders, owner of Sanders' Street Rods, points out details in a 1969 Z28 Camaro currently being worked on at the shop in Enumclaw on March 5. Photo by Alex Bruell
Josh Sanders takes over Enumclaw auto shop

Street Rods by Denny has become Sander’s Street Rods.

Don Brunell
TVW is an antidote for dwindling trust in media | Brunell

When you need the unvarnished truth, check out unedited news.

Whole Foods grocery store entrance (Shutterstock)
King County considers grocery store worker hazard pay for those in unincorporated areas

The King County Metropolitan Council will vote during its next meeting on… Continue reading