Mitch Almy: Capital gains tax fumbles our future

By Mitch Almy

In Super Bowl 49, a second straight world championship by the Seattle Seahawks seemed inevitable. With a minute remaining and down four points, the Seahawks secured second and goal at the New England Patriots’ 1-yard line. Seattle would seemingly have three chances for Marshawn Lynch, the league’s most powerful running back, to get just one yard.

What happened next is instructive. The Seahawks took victory for granted and abandoned a proven, world-beating strategy. They instead chose the one path that would snatch defeat from the jaws of victory. The play call was pass rather than run, and the Patriots intercepted the ball and prevented a Seahawks dynasty.

Eight years later, the state of Washington is again about to throw away certain victory. Thanks to good fortune, hard work and years of planning, our state is an enviable fiscal position. Yet Gov. Inslee and state legislators are tossing out our stunningly successful playbook when the stakes are highest.

You don’t have to love corporations to acknowledge that Washington giving birth to Amazon, Boeing, Costco, Microsoft and Starbucks has netted billions in tax revenue from the companies themselves. What’s also notable are the many Washingtonians who worked modest jobs at these companies in their early years, received stock and now find themselves very wealthy.

Have you ever kicked yourself for not being an early investor in Microsoft? Well, what if they had been your employer and invested for you every step of the way? Far from the C-suite, there are tens of thousands of Washingtonian engineers, facilities workers, managers, sales staff and secretaries now approaching or in retirement. They are millionaires many times over.

Washington is also the only blue state with no income tax. For years, the affluent residents of Illinois, Massachusetts and New York took their mailing addresses and their tax dollars to Arizona, Florida and Texas. In contrast, Washington’s rich residents largely stayed here – and all of us are the beneficiaries.

Every year these multimillionaires stay is fantastic news. Their property and sales tax revenue funds education, environmental programs, health care, schools and transportation. Their leaving would result in an enormous revenue hole and draconian cuts to critical programs.

So let’s stay on our winning trajectory, right? Nope. Like a certain Seahawks coaching staff, Inslee and state legislators are choosing this moment – when so many millionaires are retiring – to say, “Let’s do the exact opposite.”

Their capital gains tax makes it unbelievably lucrative for the people who pay a huge share of our bills to move elsewhere. Imagine retiring with tens of millions in stock and contemplating when and in which state to withdraw your nest egg. Currently, it’s an easy decision. Stay in the state you love. But with the capital gains proposal, you would suddenly pay a huge amount of those dollars to Olympia – just for the privilege of continuing to pay all of Washington’s other taxes.

Alternatively, you could keep your retirement funds by moving your official residence to Alaska, Florida, Nevada, Texas, Wyoming or another friendlier state. Why give the Washington state government money that could go to a large house, a rainy day fund for illness or a college fund for grandchildren?

If you doubt affluent Washingtonians will respond to a tax hike by exiting in droves, look south. When Oregon jacked up rates, the state suffered a self-inflicted exodus of rich taxpayers. Politicians aiming to increase funding for schools and social programs were left explaining why they had to make cuts.

As we make a game plan for Washington, let’s hold onto the ball this time and not throw away the future.

Mitch Almy is a stockbroker who lives in Vancouver, Washington, amid fellow tax refugees from Portland.