Initiative to repeal capital gains tax certified; ballot could be next

An initiative to repeal the state of Washington’s capital gains tax could be on the November ballot after it was certified Tuesday.

Washington Secretary of State Steve Hobbs’ office confirmed in a press statement Tuesday that it delivered “official notification to the legislature that signature verification has been completed and certified for” Initiative 2109 (I-2109).

Passed three years ago, the capital gains tax calls for 7% on profits from the sale of some financial assets like stocks and bonds, but not real estate. The first $250,000 is exempt. The tax also only applies to individuals and to gains allocated in Washington.

Conservative political action committee (PAC) action group “Let’s Go Washington” backed the initiative.

“Not only does the income tax on capital gains not support of the law or voters, but in their own words, it’s a foot in the door for a statewide income tax,” Brian Heywood, the founder of Let’s Go Washington, said. “They’re already planning to expand the tax and target more small business owners, family farms, entrepreneurs and restaurant owners. It’s time to shut the door on this for good.”

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The Washington State Department of Revenue (DOR) reported in a news release last week that first-year returns for the capital gains tax “exceeded early forecasts, bringing in more than $896 million.”

Since taxpayers began filing capital gains tax returns early in 2023 the agency also reported $937,461,292 has been collected and 3,895 returns have been filed. Additional data can be viewed here.

The DOR stated the money collected by the tax each fiscal year is earmarked for education, with the first $500 million going to the education legacy trust account, and the remainder deposited into the common school construction account.

Last week, as multiple media reports noted, a legal challenge against Washington’s tax on capital gains hit a dead end after the U.S. Supreme Court said it would not hear the case. The Washington State Standard referred to orders the high court released that listed the case, Quinn v. Washington, among those it would not take up. (A PDF of the high court’s orders can be viewed here.)

What’s next for I-2109: Legislators will consider it

I-2109 will now go to the Washington State Legislature for consideration. It has the option to pass it or propose its own version. If the legislature fails to take action, it will appear on the general election ballot in November.

Lawmakers have two choices: They can choose to pass the initiative as written, with no changes. If they do, it will become law more quickly than if it went to the November ballot. If lawmakers decline to pass it or take no action on it, then the initiative will almost certainly be put before voters in November.

The legislature does have the option to create their own alternative measure which would then appear on the ballot alongside I-2109.

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More on the Let’s Go Washington initiatives

The Secretary of State’s Office also confirmed Tuesday that the signatures on the remaining two pending initiative petitions are being verified by its elections division using a state-mandated process of examining a 3% random sample of submitted signatures.

In addition to I-2109, the secretary of state’s office has also certified three other initiatives Let’s Go Washington backed: I-2081 (“Parents have a right to know”), I-2113 (“Reasonable police pursuit”) and I-2117 (“Stop the hidden gas tax”). The PAC is also firmly behind  I-2124 (“Opt out of state-run long-term care coverage act”) and I-2111 (“No state income tax”).

After I-2113 got certified, Democratic House Speaker Laurie Jinkins (D-Tacoma) said she is disappointed the six initiatives are being pushed through by people like Heywood, who is a hedge fund manager and a significant Republican donor. Jinkins called him “an ultra-wealthy multimillionaire, buying his way onto the ballot and putting initiatives on the ballot that are going to benefit his ultra-wealthy status.”

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But her colleagues, including House Minority Leader Rep. Drew Stokesbary (R-Auburn), pointed out the initiatives all appear to have received more than 400,000 voter signatures, though some are still awaiting official certification.

“A very small number of (these voters) have any meaningful financial gain, they just want to do what they think is best for the people of Washington,” Stokesbary said previously. “They want more choices and feel like they’re dissatisfied with some of the policies that have come out of Olympia.”

Contributing: Kate Stone, KIRO Newsradio 

Steve Coogan is the lead editor of My Northwest. You can read more of his stories here. Follow Steve on X, formerly known as Twitter, here and email him here.