I often cite the 20th Theorem of Government (France, Brazil, Colombia, Maryland) to emphasize the danger of spending profligacy.
Today, let’s add the state of Washington to that list.
We’ll start with a chart from Americans for Tax Reform showing that the burden of state spending has expanded faster than population plus inflation.
As one might suspect, bad spending policy leads to bad tax policy.
I’ve already written, both in 2010 and 2015, about politicians in the state doing everything they can to impose an income tax.
Sadly, they have been able to get through a capital gains tax, thanks in part to Justices on the state’s supreme court deciding to put ideology above the Washington constitution.
Emboldened by that move, state politicians now want a form of wealth tax.
But the mere threat of such a discriminatory levy is already having a negative impact. In an article for Bloomberg, Anna Edgerton writes about how politicians in the state of Washington are driving away the geese who lay the golden eggs.
At a Christmas party last year in Las Vegas, nearly a dozen wealthy former residents of Washington state compared notes on their transition to the desert. …Las Vegas realtor Ryan Tsui has been watching the exodus unfold. The Evergreen State ex-pats he’s helped move to his city are almost exclusively wealthy, he said, with many looking for houses worth $8 million or more. …“Some of these high net worth people are liquidating a career of stock options from the nineties to now,” said Tsui. “That starts to add up.” Such portfolios are now a target in Washington. Senate Democrats included a 1% tax on the stocks, bonds, exchange-traded funds and mutual funds… Washington’s wealthy had already been watching their tax burdens rise. The state’s 7% tax on capital gains over $270,000, which survived legal challenges and a repeal effort, has only been collected since 2023. …Nevada, which has no capital-gains tax and no estate tax, isn’t the only place Washingtonians are looking. There is Arizona, where income and capital gains are taxed at 2.5% and there is no estate tax. Florida and Texas are also attractive… Investment magnate Ken Fisher blamed a state supreme court decision upholding Washington’s capital-gains tax for his move to Texas in 2023. Amazon founder Jeff Bezos didn’t cite taxes as factor in his move from Seattle to Miami in 2023, though he likely saved $288 million when he sold $4 billion in Amazon stock less than four months after he relocated. …The northwest corner of the US hasn’t seen the same population outflows as fellow blue states like California, New York and New Jersey. Washington, while politically liberal, has comparatively low taxes. Now the budget debate in Olympia, the state capital, is raising questions about the unintended consequences of vowing to soak the rich. …Washington’s loss is increasingly looking like Nevada’s gain. Jeff Saling, head of StartUpNV, said he was driving when someone told him about Washington’s then-new capital gains tax. …“As somebody who’s working on economic development, to see somebody shoot themselves in the foot like that, it makes me cry a little bit,” Saling said. “But at the same time, it’s a hell of an opportunity for us.”
Needless to say, I applaud when successful taxpayers escape greedy politicians.
Indeed, I hope so many entrepreneurs and investors leave the Evergreen State that Washington winds up with a fiscal crisis.
Maybe, just maybe, the politicians in Olympia would then learn that there are consequences to economic illiteracy. Though I confess politicians in Illinois and California haven’t learned, and they’ve caused even greater levels of damage.
Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.
