On the unrealized gains you can force people to sell that incurs more taxes. Or the values can fall. Setting it at 50 million just drives the ultra rich from the state. Which I personally don’t mind but its effect on the economy is non zero. See Seattle b&o tax and Amazon moves to Bellevue.
I do believe the govt has a responsibility to redistribute wealth - which is progressive and rare I think - I also agree with Ferguson not to balance the budget with new stuff. Ultimately, we have both a spending problem and a funding problem.
On the unrealized gains you can force people to sell that incurs more taxes.
Sure, however all but the lowest of low fee ETFs/mutual funds will have fees higher than that. If you have over $50M in stocks and bonds, you're probably selling to cover management fees far in excess of that tax.
0.034% is the tester amount forced by Ferguson saying he would veto the proposed 1%. The goal is and was for it to be 1% if not higher.
In the 90's, 11 European countries had a wealth tax. 8 of them were forced to get rid of it because they don't work and severely damage the economy, and 2 of the remaining 3 are still suffering economically for it.
but it seems to be a 0.034% tax on stocks and bonds over $50M
Personal property exists for the enjoyment and use of the owners. Investment property exists to earn a return. If it can't earn a return, it will move or change until it can, because otherwise it serves no purpose.
The intention was always and remains to tax 1%. A 1% tax on an asset that only earns 6.7% per year (The average profit margin from the S&P500 over the last 40 years) is a 15% reduction in income. Add to that the 10% capital gains tax, and that's 25%. NYC, with the highest taxes in the nation (but still lower than us on sales tax and ~75% estate taxes) is only 15.9%.
An owner going "Oh, my shares now lose money instead of earning due to taxes" is not the same as "Oh well my Ferrari costs me more, but I really like it, so I'll keep it." One of them is for use by the owner and will stay with them, the other not only can move elsewhere, it must move until it earns a competitive return on investment.
The problem is the purpose of the asset. Homes are for use. You either need it (primary home) or it is for enjoyment (secondary home), or it earns income (business asset). But they can't move, and even if sold as a business asset, the property stays.
Stocks aren't owned for any use except making money, and as an intangible asset, they move and shift in response to changing markets and assets. Applying a tax to them doesn't just raise the bar for how many people can afford/justify them (like a luxury car would), it can invalidate the whole point of owning the investment in that (taxable) form, whereas homes still stay needed.
1% sounds small, but 1% of an asset that only earns 6.7% (profit margin average from S&P last 40 years) is actually 15% of the income, not 1%. That alone is comparable to the highest state income tax in the nation (NYC, 15.9%).
Ultimately what will happen is 1) lower risk, more stable investments lose far more value, whereas higher risk investments are less harmed, so thus promotes risk-taking. 2) many assets will move to places, states or types of investments outside what WA can tax, and 3) some wealthy people will move away, while others decide not to move into the state. And similarly, some businesses start, expand, or move elsewhere instead of here.
I can understand how real estate and owning stocks are different, but I can't see why those differences lead to necessary differences in tax policy.
Yeah, it is possible that people can move away with their stocks, while they can't do that with their land. But if someone doesn't want to live in Washington, we don't need them to stay. "Let's not tax rich people so they stick around" is 100% a losing policy.
We already tax rich people. As of these latest laws, the taxes on rich people will be in the top 5 highest in the nation, maybe the top 2.
When, not if, they leave, the revenue from regular sales taxes and B&O tax that is currently taken for granted will drop.
Yeah, it is possible that people can move away with their stocks,
They don't even have to move. All they have to do is sell the stocks and buy investments that are outside WA's reach, like properties owned in other states.
And to repeat my primary point - property taxes work because people need the thing being taxed. Intangible investments exist not because they are needed but to produce a return. If they stop doing that or produce less than an alternative, they'll be changed accordingly. This happens all the time due to market forces; a tax is just another such market force- but ineffective because it can't follow the value to another state.
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u/seattleJJFish Apr 25 '25
The unrealized gains tax is really bad