Incrementalism: the path toward an income tax

Ron Muzzall

Senator

You may be familiar with the logical fallacy of the slippery slope. Simply put, it’s the idea that a certain action or effort will eventually lead to a much larger negative outcome. As a rhetorical device, most contend it is an ineffective and disingenuous basis for an argument. However, the slippery slope is not a fallacy when there is evidence. In fact, the pattern of government is one of incrementalism. Large, sweeping changes in public policy are few and far between and the system forces compromise or minor tweaks to achieve a desired outcome.

The current debate over the implementation of a state income tax is a perfect example.

Just a couple of weeks ago, Washington took the first step down the slope when the state Senate approved Senate Bill 5096, which I opposed. Proponents call it an excise tax or literally anything other than what it is – a type of income tax. Advocates of the policy said on the Senate floor that only the ‘uber rich’ would pay this tax and the wealthy should “pay their fair share” so we can afford all sorts of critical social programs.

I disagree with several of their assertions in this debate. Capital gains are considered income by the Internal Revenue Service and every state that has such a tax. Additionally, capital gains are not just incurred by the ‘uber rich’! While many Washingtonians are excluded from the bill, the reality is that many could incur capital gains when assets are sold. I know of a business that had to sell its assets during bankruptcy and it was hit with capital gains taxes. With nothing left, it had to negotiate a payment plan with the federal government on assets it lost in foreclosure.

There are a few things to consider. One, do we need it? No. New taxes at this point in time are unnecessary because we are amid a pandemic and a fragile economic recovery. Second, the state’s budget is in great shape. Just last week, the revenue forecast beat projections and is up $3.3 billion. That does not account for the billions more coming to Washington from the latest federal stimulus. We are among a few fortunate states that have been able to weather the economic impacts of COVID-19 shutdowns and fortunately our tax structure is remarkably stable.

We can make Washington’s tax system fairer. However, this specific proposal will not do that. The narrative that we have the most regressive tax system in the nation is also a bit suspect. An often-cited study about Washington’s tax woes is less than impartial. It was performed by an organization whose stated goal is to pass progressive income taxes in states that do not have one.

Adopting this policy undermines the valuable work currently underway by a recently formed tax structure committee. Instead of rushing through an unnecessary, ideological and arguably unconstitutional income tax, we should wait for that work to be completed. We need tax fairness, but we do not get that by implementing new taxes and keeping the least fair ones. Instead of incrementalism, I want to see a serious, transparent and comprehensive approach to address our state’s tax system. We must get it right for Washington’s taxpayers or I will not be able to support it.