Opinion
Making Taxes Fair with Capital Gains
National news recently revealed that millionaire GOP presidential candidate Mitt Romney pays a lower tax rate than nearly everyone, because most of his money comes from capital gains – profits from selling stocks, bonds and real estate.
Basically, the rules are rigged so that millionaires like Romney get a lower tax rate than the middle-class majority of Americans.
While Romney has been put on the defensive justifying his tax rate, lawmakers here in Washington noticed that our state is one of a very few that doesn’t tax capital gains at all.
That’s right – profits from capital gains are tax-free in Washington state.
Why does a small business owner like me care what tax rates millionaires pay on capital gains? After all, in my restaurant I spend my days preparing great Caribbean food, not tax policy. [pullquote]No matter how many tax breaks they enjoy, no millionaire buys enough jerk chicken at my restaurant to offset the loss of middle class customers.[/pullquote]
There are two reasons.
First, when millionaires get away with paying less than people like me, it skews the system. It means that the rest of us bear a disproportionate responsibility for funding important public services like education, health care and infrastructure.
Second, cut backs to these core public services are hurting economic growth, and weakening consumer demand. Cutting investments in education, health care, and infrastructure makes it that much harder for small business owners like me to survive.
The Wall Street recession has caused four years of relentless state budget cuts, cuts that cost our communities over $10 billion.
When a teacher, a nurse, or a construction worker loses their job, I see fewer customers enjoy a meal at my restaurant, I hire fewer waiters, and I then send less sales tax revenue to the state. It’s a dangerous downward spiral.
Believe me, no matter how many tax breaks they enjoy, no millionaire buys enough jerk chicken at my restaurant to offset the loss of middle class customers.
The way to fix it—to make the tax system fair to small business owners like me—is to tax capital gains so that the rich pay their fair share too.
State lawmakers are considering a proposal, HB 2563 , to do just that. The bill would create a five percent tax on high-end capital gains. It affects only the very rich—the people who are most able to pay—by exempting the first $10,000 of gains ($5,000 for single filers) and any gains from selling your primary home or farm.
Most Washington families won’t have to pay a penny more – the proposal would only affect the top three percent of Washingtonians.
HB 2563 would raise $500 million every year. That’s money for teachers and textbooks, money for mental health services and public safety – investments that make a real difference in my neighborhood, create jobs, and return the small business customer base.
Now, don’t be surprised when opponents hide behind the name of small business to fight a capital gains tax. We’ve heard these arguments before. They’ll say it will stifle investments in small businesses or that “job creators” will flee the state.
Trust me – as a small business owner, I know – people invest in a small business when the owner has a good business plan and customers coming through the door, not when a millionaire gets a tax break.
Middle class customers are the true job creators.
And if the three percent of Washingtonians affected by this modest tax seriously wanted to avoid their responsibility, where would they go? 42 states tax capital gains already, 31 at a rate higher than 5%.
The way I see it, a capital gains tax is good for business. It’s a long-term solution that will make our state budget more stable and predictable. At the same time, it helps pay for investments that create jobs and make my neighborhood safer, cleaner, healthier and better for the people who live here – my customers.
That’s good for business, good for families, and good for Washington state.
Theo Martin is the owner of Island Soul Caribbean Cuisine in Colombia City and a member of the Main Street Alliance of Washington, a coalition of more than 2,000 small business owners.
Editor's note: HB 2563, proposed by State Rep. Laurie Jinkins (D-27, Tacoma), has been stuck in committee. However, State Sen. Ed Murray (D-43, Seattle), the senate ways & means chair, has proposed a capital gains tax as well—to be approved by voters—to fund education.
Basically, the rules are rigged so that millionaires like Romney get a lower tax rate than the middle-class majority of Americans.
While Romney has been put on the defensive justifying his tax rate, lawmakers here in Washington noticed that our state is one of a very few that doesn’t tax capital gains at all.
That’s right – profits from capital gains are tax-free in Washington state.
Why does a small business owner like me care what tax rates millionaires pay on capital gains? After all, in my restaurant I spend my days preparing great Caribbean food, not tax policy. [pullquote]No matter how many tax breaks they enjoy, no millionaire buys enough jerk chicken at my restaurant to offset the loss of middle class customers.[/pullquote]
There are two reasons.
First, when millionaires get away with paying less than people like me, it skews the system. It means that the rest of us bear a disproportionate responsibility for funding important public services like education, health care and infrastructure.
Second, cut backs to these core public services are hurting economic growth, and weakening consumer demand. Cutting investments in education, health care, and infrastructure makes it that much harder for small business owners like me to survive.
The Wall Street recession has caused four years of relentless state budget cuts, cuts that cost our communities over $10 billion.
When a teacher, a nurse, or a construction worker loses their job, I see fewer customers enjoy a meal at my restaurant, I hire fewer waiters, and I then send less sales tax revenue to the state. It’s a dangerous downward spiral.
Believe me, no matter how many tax breaks they enjoy, no millionaire buys enough jerk chicken at my restaurant to offset the loss of middle class customers.
The way to fix it—to make the tax system fair to small business owners like me—is to tax capital gains so that the rich pay their fair share too.
State lawmakers are considering a proposal, HB 2563 , to do just that. The bill would create a five percent tax on high-end capital gains. It affects only the very rich—the people who are most able to pay—by exempting the first $10,000 of gains ($5,000 for single filers) and any gains from selling your primary home or farm.
Most Washington families won’t have to pay a penny more – the proposal would only affect the top three percent of Washingtonians.
HB 2563 would raise $500 million every year. That’s money for teachers and textbooks, money for mental health services and public safety – investments that make a real difference in my neighborhood, create jobs, and return the small business customer base.
Now, don’t be surprised when opponents hide behind the name of small business to fight a capital gains tax. We’ve heard these arguments before. They’ll say it will stifle investments in small businesses or that “job creators” will flee the state.
Trust me – as a small business owner, I know – people invest in a small business when the owner has a good business plan and customers coming through the door, not when a millionaire gets a tax break.
Middle class customers are the true job creators.
And if the three percent of Washingtonians affected by this modest tax seriously wanted to avoid their responsibility, where would they go? 42 states tax capital gains already, 31 at a rate higher than 5%.
The way I see it, a capital gains tax is good for business. It’s a long-term solution that will make our state budget more stable and predictable. At the same time, it helps pay for investments that create jobs and make my neighborhood safer, cleaner, healthier and better for the people who live here – my customers.
That’s good for business, good for families, and good for Washington state.
Theo Martin is the owner of Island Soul Caribbean Cuisine in Colombia City and a member of the Main Street Alliance of Washington, a coalition of more than 2,000 small business owners.
Editor's note: HB 2563, proposed by State Rep. Laurie Jinkins (D-27, Tacoma), has been stuck in committee. However, State Sen. Ed Murray (D-43, Seattle), the senate ways & means chair, has proposed a capital gains tax as well—to be approved by voters—to fund education.
