Taxes upon Taxes

Washington law makers are proposing a slew of new taxes for 2021…

Sugar Tax

The most recent proposal is a tax on sugary drinks. Seattle passed this law a year ago and claims consumption is down but how more likely is it that people buy those drinks and their groceries outside the city? Of course this tax again attacks the people they claim to care the most about, low income and minorities.

From King 5:

OLYMPIA, Wash. — Your favorite soda, juice and sweetened coffee drinks would likely get more expensive under the latest tax proposal debated in Olympia.

Modeled after a similar ordinance in Seattle, Senate Bill 5371 would charge beverage distributors 1.75 cents for every ounce of a sweetened drink that has more than 20 calories in a 12-ounce serving. That would make a 12-ounce can of regular soda cost an additional 21 cents.

Bill sponsors said, while other cities and communities around the country have similar taxes, Washington would be the first in the nation to establish a statewide tax on sweet drinks.

Funds raised would support public health programs and fund what backers called a “health equity account” for communities of color.

Dr. Ruchi Kapoor, with the American Heart Association, testified in favor of the move, “It's both a tool for improving health outcomes and raising critical funds to invest in communities that have long experienced health inequities."

But lawmakers heard testimony from business owners and grocery, food and beverage industry representatives who say the tax would be bad for business.

Debbie Brese owns Tacoma’s Cloverleaf Pizza and told senators the pandemic has caused a 30% decline in business.

“Senate Bill 5371 will add additional costs to my already elevated expenses for my business each month that I simply do not have,” said Brese.

Republican Rep. Ed Orcutt, R-Kalama, said the public does not support new taxes.

”From what I'm hearing from people all over the state is, ‘Please don't raise the gas tax, please don't institute a capital gains income tax,’” said Orcutt.

He said lawmakers can pass a balanced budget without additional taxes, and without having to make any cuts.

In addition to the sweetened drink tax proposal, Democrats have proposed a new capital gains tax on the state’s top 1% of investment earners.

Another House proposal calls for an 18-cent per gallon increase in gas prices over the next two years.

Speaker of the House, Rep. Laurie Jinkins, said the taxes are needed to address the state's multiple needs, including work on the Interstate Bridge between Vancouver and Portland.

”We have a failing bridge joining Oregon and Washington that we need to move forward on, so that kind of work does not come for free,” said Jinkins, D-Tacoma.

Senate Majority Leader Sen. Andy Billig, D-Spokane, also said the state should be looking at increases on taxes for gas and sweetened beverages.

“In so many areas we have over the last couple of decades funded and run things on the cheap and public health is a great example of that,” said Billig.

If you think they are doing this because they actually care about your health, I mean come on man, this about money. Its always about the money. According to the seattle times in 2019 Seattle raised $16 million in 9 months from this tax, 22.4 million total the first year. It doubled the price of a 12 pack of soda, added $10 to a pack of Gatorade that cost $15.99, $7.35 to a regular case of coke. It did not reduce or appear to reduce the amount of people buying soda. Interestingly enough places like Starbucks that sell coffee milkshakes laden with sugar were left out of this bill. Wouldnt want those rich seattleites having to pay more for their morning glory. The tax was the cities fastest growing revenue source for 2019. Think about that, a sugar tax, well really a convenience and grocery store tax because it wasnt equitably applied to all sugary drinks, thats their buzz word right? Equity? Was the fastest growing revenue source. Thats a sad and pathetic way for the city to get funds. This is how seattle chose to spend some of the money.

Programs that the City Council has approved funding ($5,658,494) for in 2018

already include:

• Fresh Bucks, Food Action Plan ($2,404,359)

• 13th Year Promise Scholarship ($1,381,885)

• Innovation High School, Summer Learning, Summer Melt ($1,004,500)

• Our Best ($189,000)

• Parent-Child Home Program ($525,000)

• Food Banks ($153,750)

Proposed investments ($4,120,639) awaiting review by CAB in Spring 2018:

• Farm to Table

• Fresh Bucks to Go

• Food Banks

• Out-of-School Time Nutrition Program

• Early learning programs

In addition to these investments, revenue from the new sugary drinks tax will also support evaluation work ($500,000) to track the tax’s effectiveness and impacts, job retraining support ($500,000) for those employed within the local distribution network for the beverage industry and general administrative support ($1,082,000) in city government.

Of course the city ended up with much more than they thought because it didnt really stop people from buying the drinks, so Durkan balanced her budget with the some and who knows where the rest went. Its all about social programs and wealth re-distribution in seattle.

State lawmakers see this and im sure are frothing at the mouth to get a piece of this. Can you imagine what a state wide sugar tax would rake in? Hundreds of millions they could spend on their pet projects and social programs and mismanage. Like I said, this isn’t about your health, because it didn’t reduce consumption, its about money. Its about the erosion of your rights and choices. If it was, it would apply to ALL sugary drinks, not just ones in cans and bottles. The people who can afford Starbucks and other expensive sugary drinks everyday from their specialty stores would also have to bear the burden and pay the price. Instead they will continue to target the low income, most vulnerable, and minority people with their tax grab. The other problem with this tax is stores pay the tax up front when they buy the products. This raises the cost of inventory dramatically. Then they pass the cost on to you. Stores are already suffering from covid-19 and now we want to lay more burden and costs on them? Some grocery stores have already closed their doors in Seattle and left. How many stores will this effect or cause to leave? What will this do to stores thoughout the state? No other state in the nation has a state wide sugar tax

Gas Tax

Washington wants to impose another gas tax which would make us the highest gas tax state in the nation.

From the AP…

Democratic leaders in the Washington state House on Tuesday unveiled a 16-year, $25.8 billion transportation package that includes an 18-cent increase in the gas tax and a new fee on carbon emissions.

The Everett Herald reported that supporters have said the new revenue is needed to cover the cost of projects like the replacement of the Interstate 5 bridge over the Columbia River and the removal of state-owned culverts that are blocking fish passage.

Democratic Rep. Jake Fey, chairman of the House Transportation Committee, said that funds would also go toward maintaining and preserving local roads and state highways and other construction projects.

Under the proposal, $17.6 billion would come largely from the gas tax increase, which would be imposed over the next two years and indexed for inflation going forward.

The carbon fee would provide $8.2 billion, with the fee starting at $15 per metric ton of emissions, rising to $20 in the next biennium and $25 in the 2025-27 budget cycle. Diesel fuel taxes will rise 21 cents per gallon under the plan.

“We are really committed to moving a transportation package and getting it to the governor’s desk for signing,” said House Speaker Laurie Jinkins, D-Tacoma. “I think this moves the ball down the field well.”

The chairman of the Senate Transportation Committee, Sen. Steve Hobbs, is expected to present the Senate proposal as early as next week.

Hobbs said that plan will be similar to the 15-year, $17 billion package he’s pushed the past two sessions — which raises money from a gas tax hike, plus either a flat fee on carbon emissions or a cap-and-invest system.

Along with this they are proposing a low carbon fuel standard, which require gas manufacturers to change the fuel mixture for washington in order to reduce the amount of carbon burnt in your vehicle. California and Oregon currently require this and California has the highest gas tax in the nation. Of course prices will rise when fuel manufacturers have to change the fuel mixture for two or three states. According to some republican law makers this could add another $1 to your gallon of gas. Can you afford $5 a gallon gas? Because thats what we’re looking at. Gas prices have already gone up here in Wasington about .50 a gallon since Biden took office. Couple our national price increases with our state taxes and it is going to become very expensive to drive your car.

Capital Gains Tax or Income Tax

From WA policy center.org

Proponents of a capital gains tax need to be honest and call it what it is, an income tax. There is no honest debate.

The IRS answered this question directly saying, “It is an income tax.” Every state revenue department in the country, all 49 states other than Washington, treat capital gains taxes as income taxes.

Imposing an income tax, however, will throw away what Washington’s Department of Commerce calls a “competitive advantage” and “great marketing” for the state. A capital gains tax in particular will inject extreme volatility into the state’s revenues and budget.

“But the more important benefit of passing a capital gains tax is on the legal side, from my perspective. The other side will challenge it as an unconstitutional property tax. This will give the Supreme Court the opportunity to revisit its bad decisions from 1934 and 1951 that income is property and will make it possible, if we succeed, to enact a progressive income tax with a simple majority vote.”

Those words were among the emails we obtained thanks to a public records request for the correspondents of certain legislators, Washington Policy Center obtained emails from key advocates proving what we've been warning for years-- that the motive for the income tax on capital gains is to spark a court challenge that would enable a new State Supreme Court to overturn nearly a hundred years of precedent and allow for a broad-based income tax.

Capital gains taxes are volatile and unreliable sources of tax revenue. Delaware described the tax as "exremely volatile and unpredictable." Massachussetts as "among the most volatirle and unpredictable major sources of revenue." California described their capital gains income tax as "among the more significant sources of revenue volatility." And Virginia described them as "the most volatile tax source that any state has to forecast."

From the office of financial management..

This proposal would tax individuals for the sale or exchange of capital assets they have held for more than one year, unless an exemption applies. Capital assets are personal property you own for investment or personal reasons and do not usually sell in the course of business.

The tax would equal 9 percent of your Washington capital gains.

You would be required to pay capital gains tax if your taxable capital gains exceed:

• $25,000 or

• $50,000 for individuals filing joint returns

The capital gains tax does not apply to:

• residential real estate sales

• retirement accounts

• assets the government seizes under eminent domain, or assets you sell or exchange under threat of eminent domain

• cattle, horses, or breeding livestock you (the farmer) hold for more than 12 months, and more than 50 percent of your gross income is from farming or ranching for the year of the sale or exchange

• agricultural land if you (the owner) has regular, continuous, and substantial involvement in the agricultural operation by meeting the criteria under Internal Revenue Code (IRC) section 469(h) for the 10 years prior to the date of the sale or exchange

• tangible personal property you use in a business that qualifies for an income tax deduction (IRC sections 167 or 179)

• timber, timberland, or dividends or distributions from real estate investment trusts derived from gains from the sale or exchange of timber.

If you pay capital gains tax to another jurisdiction on a taxable sale/exchange of a capital asset located in the other jurisdiction, you may take a credit on your Washington return up to the amount of tax you already paid.

You can take a business and occupation (B&O) tax deduction for your capital gains, so you don’t pay the taxes twice.

You must report and pay capital gains tax at the same time you file your federal income tax return. If you receive a filing extension for your federal taxes, you will also receive a filing extension for your state capital gains tax. However, you must still pay the tax due on your original filing date.

Do you honestly think that this capital gains tax wont eventually be tweaked to include lower incomes? Retirement accounts? Farms? Residential real estate? Come on. You know better than that. They’ll gradually ease this in and then get us all. Once we start down this road we can’t go back and they will find a way to tax everyone as much as they can.

We have a b&o tax in this state and sales tax instead of capital gains or income tax as it should really be called. DO you think that b&o will go away if this tax is enacted? Nope,in fact they are proposing an increase in the b&o tax!

Increase service business and occupation tax rate to 2.5 percent

Description

This proposal would increase the business and occupation (B&O) tax rates for most service businesses by 1 percentage point.

• The service and other activities B&O tax rate would increase from 1.5 percent to 2.5 percent.

• The gambling/contests of chance B&O tax rate would increase from 1.63 percent to 2.63 percent.

This proposal is effective July 1, 2019.

Current law

Many individuals, corporations, and other entities that engage in business activities in Washington are required to pay business and occupation (B&O) tax on their gross receipts. Businesses that engage in more than one type of activity in Washington may be required to report under more than one classification. They may also be subject to more than one B&O tax rate. There are 12 B&O tax rates that apply to 55 different tax classifications.

Service and other activities

The service and other activities classification applies to income from:

• most service activities, including medical, architectural, legal, and janitorial services, and

• activities that the law does not specifically list under another B&O tax classification, such as commission income of certain brokers and agents, solid waste collection charges, and movie admission charges.

The service and other activities B&O tax classification tax rate is 1.5 percent.

Gambling/contests of chance

Persons operating contests of chance, such as social card games, raffles, bingo, and pull tabs, report under either:

• the service and other activities tax rate if their income is less than $50,000 per year, or

• the gambling/contests of chance rate of 1.63 percent

Businesses are already getting hammered because of covid and the shut downs, limited capacity requirements, and other requirements that cities have imposed. Now we want to hit them with more taxes? What is that going to do to these businesses just hanging on for dear life? Its going to kill them. Washington is already a very unfriendly business state with some of the highest business taxes in the country. We need to support our businesses and not continue to hinder them with ridiculous expenses.

Washington has a pretty hot real estate market, so of course the state government needs to dip its hand into that too...

Oh you want to sell your real estate? Well hey we’re gonna increase your taxes for that too!

Graduated real estate excise tax rates range from 0.75% to 2.5%

Description

This proposal creates graduated state real estate excise tax (REET) rates of:

• three-quarters percent (0.75) if the selling price is less than $250,000,

• 1.28 percent if the selling price is at least $250,000 but less than $1 million,

• 2 percent if the selling price is at least $1 million but less than $5 million, and

• 2.5 percent if the selling price is $5 million or more.

The increase in general fund revenues from this proposal will be transferred to the motor vehicle account.

This proposal is effective July 1, 2019.

Current law

Individuals, corporations, and other entities owe real estate excise tax (REET) on their sales of real property, unless the sale qualifies for an exemption from the tax. Taxable sales include transfers of ownership in real property and in controlling interests in entities that own real property in Washington. Real property includes any interest in land or anything attached to land. The state tax rate is 1.28 percent. Local jurisdictions may add additional local rates. The combined state and local rate in most areas is 1.78 percent.

As if real estate prices aren't already expensive enough. This will end up being passed on to sellers or buyers increasing costs even more and preventing people who were already on the edge from being able to buy that house of their own. Again, this will negatively impact the people the state claims to care the most about, low income and minorities. How “equitable” are tax policies like these? In places like Seattle where they also add their own tax onto real estate you’ll be looking at 3% or higher excise tax. Again when is enough, enough?

According to the tax foundation Washington is #4 in the nation for the highest state and local taxes.

We rank 19 in the nation for highest businesses taxes, #9 in the nation for state sales tax, #2 for state and local general sales tax, #4 for gas tax, #8 for cigarette tax, and #26 for property tax.

On top of all these state taxes we have cities like Seattle enacting high taxes on anything and everything. Every way possible to take more or your hard earned money and give it to politicians pet projects, social programs and people who don’t work. The economy is in a position right now that cannot support these high tax rates. We are trying to recover from the pandemic, people and businesses are trying to get back on their feet. The state needs to cut costs and programs instead of increasing them if it needs more money. They are on the verge of creating a financial catastrophe like we have never seen. Its time to pull our heads out of the sand and put a stop to this. I encourage you to reach out to your state representatives by phone or email and let them know want to stop being taxed. No new taxes. Not right now. Let the economy recover before we start considering all these taxes that will do nothing but hinder growth.