Why advisory vote to repeal state capital gains tax does (and doesn’t) matter

The “repeal” side of an advisory vote on a capital gains tax approved by the state Legislature is out to an early lead following Tuesday night’s election results.

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The Democrat-led Legislature approved the 7% tax on capital gains over $250,000 in 2020, which is estimated to bring in over $400 million in 2023, the first year it is due to be collected. Those dollars will be used to invest in child care and early learning, among other things, as a way to balance the state’s tax code. That’s according to supporters, who insist it will impact less than 1% of the state’s wealthiest taxpayers.

It has since drawn the ire of anti-tax groups like the Freedom Foundation, which filed a lawsuit in Douglas County seeking to invalidate the tax altogether. Early results from this year’s general election indicate a similar opposition among voters, with nearly 63% choosing the “repeal” option out of the roughly 1 million ballots counted so far.

Advisory votes have appeared on Washington ballots since the 2007 passage of Initiative 960, led by anti-tax activist Tim Eyman. While much of the initiative was later struck down in court, the part that was allowed to remain mandates that voters be able to participate in a nonbinding vote to either repeal or maintain any tax increase approved by state lawmakers.

That means that even if the final tallies indicate that voters wish to repeal the state’s capital gains tax, lawmakers will not be obligated to act, taking it more as a recommendation.

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Even so, it might also set the stage for a much more impactful Round 2 next year, in the form of Eyman’s latest ballot initiative.

Registered as Initiative 1373, it would prevent city and state lawmakers from imposing any future excise, income, or payroll taxes, while invalidating the statewide capital gains tax, as well as Seattle’s JumpStart payroll tax. Eyman is targeting the November 2022 election for the initiative, needing 400,000 signatures by Dec. 30 of this year.

Although I-1373 would represent a far more expansive measure than a simple repeal of a single tax, this year’s capital gains tax advisory vote could just be the beginning of a year-long fight where all roads lead to next year’s election.

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