Budget & Tax

Tax policies have consequences

February 7, 2024

Curtis Shelton

Recent regulatory filings show Jeff Bezos plans on selling 50 million shares of Amazon stock over the next year. This sale would be worth $8.5 billion as of this writing with Amazon’s stock priced at $170. If Bezos still lived in Washington state, he would owe the state $588 million in capital gains taxes. But by moving to Florida, the former Amazon CEO would owe a grand total of $0 in capital gains taxes.

This is another example of an attempt to tax the wealthy backfiring. Washington, which prohibits a state income tax via its constitution, created the capital gains tax as a workaround of sorts.

While a state government can use force to take your money, it cannot use force to keep you from moving away. This is the real drawback to a tax system designed to rely on so few. In 2022 only 3,765 tax returns paid the capital gains tax in Washington state, which is only 0.1 percent of the total number of tax returns filed in the state. All it takes is a handful of those few to decide to move to make a real impact on tax revenue and create real problems for the state budget. Which is precisely what these policies lead to.

In 2023 Washington ranked 39th in terms of net population migration between states. More people moved out of the state than into it. The states that ranked at the bottom were New York and California, two high-tax states with budget deficits in the billions.

Instead of punishing those who have been successful, states should adopt policies that make it easier for more people to find that same success.