OLYMPIA–Against the backdrop of now three separate income tax on capital gains proposals (HB 1496, SB 5096 and SB 5204) comes the question: What impact do these tax proposals have on the state’s competitiveness? We’ve previously documented the Washington Department of Commerce saying no personal or corporate income tax is a competitive advantage for the state. Now comes an interesting interview with one of WA’s newest CEOs to move from California–Tanium’s Orion Hindawi.

Hindawi had many thoughtful things to say during a February 4, 2021 event sponsored by the Washington Technology Industry Association. Among them was a warning for state policymakers on capital gains taxes. He said:

“The state of Washington has a very attractive tax regime today and the Governor continues to say he wants to change it. This whole billionaire’s tax thing, whether it happens or it doesn’t happen, it’s not actually going to fundamentally change my opinion about where I want to live, but a lot of people are going to look at that and say that’s a vilification of me. You’re targeting me, I don’t want to go over there if you’re targeting me.

The Governor of Texas is sitting there ripping up California income tax statements on YouTube and saying this will never happen here. I think a lot of people look at that and they say, ‘You know what, that sounds pretty attractive.’ Frankly, if I’m going to be paying 10% in taxes, you know where I want to do it? It’s in Hawaii.

In essence, even if nothing has actually happened, the narrative in Washington today is that they don’t want to maintain what Nashville, and Austin, and Miami and a bunch of other places are saying that they do want to maintain. Which is very attractive to business owners.

People can argue about whether it’s right or it’s wrong, that’s somewhat irrelevant. The question is actually do you want these people moving to your state or not. If you’re willing to accept the fact that they’re not going to move to your state and bring those jobs with them, then institute whatever policies you want.

I think the Governor needs to understand that every time he says capital gains tax, he loses 10 companies. When he wakes up and he says it into his pillow, five companies don’t move. This is becoming a huge PR issue for Washington state even though nothing has substantively changed.

I’m not here to opine on what we should do as a state, I can just tell you cause and effect. Cause and effect is you keep on telling people you’re going to raise taxes, people keep on not coming. The reality of the situation is the people in Washington state have flexibility they didn’t have a year ago and that’s persistent flexibility.

It’s not just who are we losing who’s not coming, it’s also who are we losing that’s currently here that won’t stay. People need to be fully aware, there are a lot of people who currently call themselves Seattle residents or Washington residents, who don’t have to be tomorrow.”

This discussion mirrors a call I received from another California employer a few weeks ago. He was considering moving to Washington and starting new businesses. He was concerned, however, about the proposals for an income tax on capital gains. He doesn’t have interest in jumping out of the frying pan and into the fire. Based on the comments from Hindawi, other employers don’t either.

While employers may be cringing at the Washington capital gains income tax debate, it appears the Governors of Texas and Florida are enjoying the fallout.

-Mercier is Center for Government Reform Director, Washington Policy Center (Tri-Cities office).