Washington lawmakers consider separate capital gains tax proposals
As part of the ongoing effort to fix Washington’s regressive tax system, both the state House and Senate are considering some form of a capital gains tax.
In the Senate, the capital-gains tax proposal is 8.9 percent tax on profits of capital-gains earnings above $250,000 for individuals and joint filers.
Democratic Senator Andy Billig announced the proposal last Friday, explaining the tax would impact about 8,000 of the wealthiest Washingtonians while helping many others.
“The money collected from the capital gains tax will reduce taxes for 300,000 small businesses, reduce property taxes paid by senior citizens and reduce sales tax by ending the sales tax on diapers, medical and mobility equipment, over-the-counter medication, and feminine hygiene products,” Billig said.
“The capital gains tax will also fund the Working Families tax credit which will provide tax relief for approximately 400,000 Washington families struggling to make ends meet,” Billig added.
The Senate version will get its first public hearing Monday.
The House version, which differs from the Senate version, is dubbed the “Extraordinary Profits Tax.”
This proposal is for a 9.9 percent tax on capital gains of $100,000 for individuals, and $200,000 for joint filers. It would be used largely to fund K-12 education and behavioral health.
Democratic Rep. Laurie Jenkins says this version would impact about 14,000 Washingtonians.
“We can’t keep on relying on these regressive taxation approaches like sales tax, and property tax, and B&O tax to fund state government,” she explained at a recent committee hearing. “And the work that we’re doing for the people, we’ve got to move to a more progressive approach to do this, so this bill is my attempt – along with a lot of others – to try and do this.”
Many others strongly opposed the proposal at the hearing, including anti-tax activist Tim Eyman.
“I think voters are sick and tired of this insatiable tax appetite that government seems to have. No matter how much you get it, never seems to be enough,” Eyman said.
Some business owners also spoke against the House proposal explaining that while they appreciated the exemption from the capital gains tax for retirement funds, many of them have planned for retirement by investing in their businesses – expecting to use the money from selling the business when they’re ready to retire as their retirement fund. It’s something they say would take a hit under the proposal – and possibly from even starting a business.
It remains to be seen whether the two chambers can work out the differences between the two proposals in the final weeks of the session, and come up with a single version that will pass.
Should that happen the Freedom Foundation, a conservative think tank in Olympia, has promised a legal challenge.
“Graduated taxes on income, including income from capital gains, are clearly forbidden under the Washington State Constitution,” said Freedom Foundation CEO Tom McCabe in a press release last week.
“That was true last year; it’s true now; and, unless the constitution is amended, it will be true every time it’s tried, McCabe added”