Washington State’s Capital Gains Tax Surpasses Revenue Expectations
Washington State’s capital gains tax has far exceeded revenue expectations, bringing in nearly $850 million in its first full year, compared to the projected $250 million. The significant increase in revenue highlights the prevalence of under-taxed wealth and emphasizes the missed opportunities for states without capital gains taxes.
Currently, eight states in the United States do not have a capital gains tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. Additionally, nine states have capital gains tax rates that are much lower than their ordinary income rates. Unsurprisingly, these states tend to compensate by imposing higher sales tax or property tax rates compared to the national average.
However, relying solely on sales tax or property tax as major revenue sources has its drawbacks. Sales taxes are generally regressive and lack progressiveness, while property taxes, tied to property value rather than income, can also be regressive. This means that the burden of these taxes is distributed equally across income strata, rather than equitably.
Moreover, multiple states are reporting revenue shortfalls, with New Jersey expecting a $1.2 billion decrease in income tax revenue for 2023. In such revenue crunch situations, sales tax hikes are often the go-to solution. Washington State, on the other hand, serves as an example of how equitable and effective tax policies can be implemented.
Bloomberg Tax is committed to providing insights and expertise on tax matters, helping individuals and businesses navigate the ever-changing seas of taxation. The upcoming decision in Moore v. United States presents an opportunity for the Supreme Court to establish guidelines that enable Congress to impose accurate taxes on constructively received income.
Furthermore, tax professionals Donald Zidik and Eileen Reichenberg Sherr provide insights into federal education tax credits and how eligible individuals can apply for them. Attorney Jim Peterson highlights potential negative consequences of a US regulator’s proposal to increase auditors’ responsibility for clients’ noncompliance.
In the UK, Matthew Greene and Pavlos Theodoulou review the Upper Tribunal’s decision regarding determining residency status under exceptional circumstances, while Plante Moran’s Steve Schnepel and Randall Janiczek discuss ways businesses can navigate changes in downward attribution rules to avoid significant stock reporting obligations.
Additionally, Robert Marchant explains the potential complications organizations may face under the UK paymaster services concession, and Peter Fairchild provides an overview of the UK tax rules affecting nonresident entertainers and sportspeople.
Massachusetts recently passed a 4% tax on millionaires to fund free school lunches for students. However, some argue that it would be more effective to reinstate the federal free student lunch program instead of tying it to state funding.
Overall, the world of tax news remains active, with discussions on beneficial ownership reporting, retirement planning, and suggestions from tax practitioners on improving challenging tax rules.
As the news landscape continues to evolve, Bloomberg Tax remains committed to delivering up-to-date, insightful analysis and expert opinions to facilitate informed decisions.
