One obvious reason why the 7% capital gains tax didn’t solve Washington’s budget problem is because state policymakers remain profligate in their spending habits—Washington’s biennial budget has effectively doubled over the past decade.
Another reason why the tax didn’t solve their budget woes is because the additional tax burden encouraged high-earning Washingtonians to leave the state and take their incomes with them.
The chart below shows the net migration of earners making more than $200,000 between 2015 and 2022.[1]Over 2,300 high earners left the state on net in 2021, the year the 7% tax was enacted, and almost 6,400 more left in 2022 when the tax came into effect.