Don Nielsen: Washington's new tax hikes will backfire

Business Journals

4 days ago

Story Highlights Gov. Bob Ferguson signed Washington's largest tax increase in history.
Washington raised its maximum estate tax rate to 35%.
The state increased its capital gains tax to 9.9%.
Gov. Bob Ferguson recently signed into law the largest tax increase in state history. It included a 6-cent per gallon increase in the gas tax. Washington already had the third-highest gas price in the country, exceeded only by California and Hawaii.
Next, Ferguson approved a rent control package that limits rent increases. Any student of economics knows that if you restrict a business's ability to make a profit, the business will stop investing. It's just common sense. Given these constraints, why would any builder decide to build in Washington? Despite its stated goal, this legislation will not increase housing. It will reduce it. If you think housing costs are high now, just wait.
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The actions above continue to reduce the attractiveness of Washington to business investment. But it gets worse.
Washington had the highest maximum estate tax rate in the country at 20%, and then just raised it with the most recent budget to a whopping 35%. If you've achieved any degree of financial success during your lifetime, for your children's sake, you'll probably want to make sure you don't die in Washington.
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If the estate tax wasn't bad enough, the state also initiated a 7% capital gains tax in 2023 and then raised it to 9.9% this year. The action gives businesspeople even more reason to leave the state, reducing the number of people who create jobs and boost the economy. We are losing the very people we need.
Before the tax increases, Washington had the fourth-highest cost of living in the country, according to Patriot Software. Yet our politicians talk about trying to help the poor and the middle class. It is evident that our politicians did not take economics in their schooling. Or, they have forgotten everything they learned.
Crime and homelessness are also major problems. Washington has one of the highest homeless rates per capita in the U.S., yet we continue to pour money into programs that make the problem worse, such as buying apartments to provide permanent housing for drug addicts and alcoholics with no strings attached. We treat an addiction problem as a housing problem.
Further, by deemphasizing law and order, we allow people to destroy the appearance of our cities by treating graffiti as a nuisance rather than a crime. And even when arrests are made, we vote for soft-on-crime judges who immediately release accused criminals.
On top of all this, we spend more state money per student than any other state in the nation, yet our students are performing worse than ever. Fourth-grade reading scores have been declining and are now at 1994 levels. Enrollment is declining as costs increase. The percentage of high school graduates who attend college is declining. Our student-to-teacher ratio is the ninth worst in the nation, even as teacher pay ranks third. In short, our high-cost education system is failing our children.
In summary, Washington in the last decade has moved from one of the best places to live to one of the worst. Today, Washington has a high cost of living, a highly regulated business environment, a poor education system and a tax system that penalizes success more than any other state.
Why would any successful person want to live here or even die here?
Don Nielsen is the chairman of the Discovery Institute's American Center for Transforming Education. The Discovery Institute is a conservative think tank based in Seattle.