POLL: In spite of the pandemic Washington state has a surplus in excess of $10 billion. Does that justify a repeal of the capital gains income tax passed by majority Democrats in 2021?

The Democrat’s (probably unconstitutional under the WA constitution) capital gains tax should be repealed as, simply, bad tax policy and bad economics. The easiest way to avoid capital gains taxes is to not sell investments that generate a taxable capital gain. However, this distorts both the investor’s portfolio and the flow of capital to its most efficient use. This lowers everyone’s standard of living. In addition, the high inflation (caused by federal government mis-management of money supply and over-spending) will create false “paper gains” that are taxed as capital gains even though the underlying value of the investment (after accounting for inflation) may not have changed or may even have fallen. (This is obviously not fair.)

While it is true that less-well off citizens may not ever have investments with capital gains, a large majority of workers have 401k and similar retirement accounts. When capital gains are taxed, that reduces the value of all investments including those in savings accounts and in real estate. (Would you like to see your home become less valuable?) One must understand that in our complex economy, any tax on any body ends up costing everybody, by some indirect method.

One example, you want to buy a new truck. (Rich) investors own stock in Ford Motor. So, their investments are subject to higher taxes, reducing the value of Ford stock. To attract the necessary investment to develop and build the latest features, Ford must lower wages to their workers, raise prices of their products, and lower costs by not developing new features for their truck. So when you go to buy that new truck, you pay more and get less.

We all end up paying the taxes that government collects. It is a fiction that “somebody else” pays a tax. There’s an old saying by politicians, “Don’t tax you, don’t tax me, let’s tax the guy behind the tree.” In the end, we’re all behind the tree.

Article Source: Clark County Today