It’s time for progressivism in tax policy
As the Legislature considers raising taxes, they should keep in mind the two Washingtons, just miles from each other in Grays Harbor, writes Jonathan Martin.
Times editorial columnist
The state budget is in a pickle, squeezed by demands for better schools, humane mental-health care, affordable colleges, state-worker pay raises, and on and on.
Even Mother Nature is on the list, dropping a nine-figure bill for the cost of fighting last summer’s epic wildfires. Totaled up, the budget hole is in the billions.
Sure, the Legislature will find ways to chip that down. But I, and fiscal analysts more conservative than I, don’t see how lawmakers leave Olympia next session without raising taxes.
But before they do, I wish they would take the drive I took last month, due west of Olympia to the Pacific coastal town of Seabrook.
The drive was a startling reminder of the two Washingtons: Seattle’s white-hot new economy, where wealth now flashes like summer sun off a wave; and most of the rest of the state, grinding it out on the remnants of last century’s economy.
The drive takes you through towns that are palpably desperate, and past the recently closed Grays Harbor Paper mill in Hoquiam, once as economically vital for that town as Microsoft is for Greater Seattle.
In the past decade, Grays Harbor County has a net loss of more than 2,400 jobs, 10 percent of the workforce — and nearly all of them were well-paying in manufacturing and timber industries. Local unemployment rates are more than double that of King County.
Just a few dozen miles up the road is Seabrook, an elegant new vacation resort town on a bluff above the Pacific Coast that caters to affluent urbanites. In the decade that Grays Harbor fell, Seabrook grew with Seattle’s ascent into the echelon of America’s booming cities.
Seabrook has a dog groomer, a thin-crust pizza truck, a wine bar and homes featured in Sunset magazine. Kids bike to the indoor pool and their parents sip chardonnay on the breathtaking beach.
While the average home price in Hoquiam, is about $73,000 (and falling), according to Zillow, weekend homes at Seabrook routinely sell for $500,000, and then sit empty, waiting to be rented. One home sold for $1.2 million.
On a recent weekend renting a house there, fresh from grim briefings on the state budget crunch and potential tax options, I had a hard time reconciling the cluster of wealth with the grim poverty just miles away.
I’m not raising the Socialist Alternative banner, and I don’t begrudge anyone’s sweet second home. But I do begrudge a tax code that favors the winners, and then gives them an extra boost up the wealth ladder.
Washington’s tax code, the most regressive in the nation, does that better than any other state. The bottom 20 percent of earners pay 16.9 percent of income in state and local taxes; the top 1 percent pay 2.8 percent.
The federal tax code helps, too, widening the income inequality gap to the greatest since the peak of the Gilded Age in 1928.
With the state Supreme Court breathing down the Legislature’s neck to pay for constitutionally adequate schools and a strong safety net, who should pay more? The laid off millworker in Hoquiam? Or the guy, just up the road, with the million-dollar view of the beach on his weekends?
To level the tax burden, the Legislature should give a hard look at a 5 percent state tax on capital gains, the profit reaped on the sale of an investment such as stocks. The idea needs a full airing, because a capital-gains tax would affect the angel investor network that fuels Seattle’s startup engine. Revenue from capital gains taxes are also volatile, swinging with the market.
But nearly all competing tech-centric states have capital gains taxes. California has a 13.3 percent capital gains tax for millionaires, plus a big income tax, and that has not slowed Silicon Valley.
Washington voters have gone all in on the progressive policy agenda, with marriage equality, legalized marijuana, gun control.
It’s time for a bit more progressivism in tax policy.
Jonathan Martin's column appears regularly on editorial pages of The Times. His email address is firstname.lastname@example.org