Initiatives update: Capital gains tax to stay in place; WA cares measure not called

An initiative to repeal the state of Washington’s capital gains tax — Initiative 2109 or I-2109 — has failed to pass with Washington voters.

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. It took effect on January 1, 2022, with the first payments due by April 18, 2023.

The initiative question was framed the following way for Washington voters:

“This measure would repeal an excise tax imposed on the sale or exchange of certain long-term capital assets by individuals who have annual capital gains of over $250,000. Should this measure be enacted into law? Yes [ ] No [ ]”

So, a ‘No’ vote kept the capital gains tax in place where as a ‘Yes’ vote repealed the law.

More than 2.5 million votes were cast on the initiative. More than 1.6 million of those voters, or 63.2%, voted “No” while over 972,600, or just under 38%, voted “Yes.”

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 previously. “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.”

The Washington State Department of Revenue (DOR) reported in a news release in January 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.

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I-2124 race: ‘No’ holds lead in WA Cares measure

An initiative that would allow people to opt out of the new tax for the state-run long-term-care program — Initiative 2124 or I-2124 — currently is losing with Washington voters.

Last July, Washington became the first state to deduct money from workers’ paychecks to finance long-term care benefits for residents who can’t live independently due to illness, injury or aging-related conditions such as dementia.

The push to find a long-term care solution comes as Washington and other states prepare to face a doubling of the 85-and-older population over the next 15 years — a crisis that will challenge the ability of states to meet long-term care needs already promised through Medicaid.

The initiative question was framed the following way for Washington voters:

“This measure would provide that employees and self-employed people must elect to keep coverage under RCW 50B.04 and could opt-out any time. It would also repeal a law governing an exemption for employees. Should this measure be enacted into law? Yes [ ] No [ ]”

A ‘No’ vote opposed the ability to exit the program. Meanwhile, a ‘Yes’ vote allowed people the chance to exit.

With more than 2.5 million votes cast, nearly 1.4 million people — about 55.5% voted ‘No’ and around 1.1 million people — 44.5% — voted ‘Yes.’

Washington’s payroll deduction approach to long-term care funding is getting the attention of policymakers around the country, including California and New York, which are developing programs similar to WA Cares.

An estimated 7 million to 8 million Americans have private long-term care insurance, which can be costly and generally requires applicants to pass a health screening. Many assume Medicare covers long-term care, but that’s not the case except for limited care for skilled nursing or rehabilitation. Medicaid requires applicants to be low-income and spend down all life savings to $2,000 or less to qualify.

Washington workers started paying into the WA Cares Fund at the start of July. At that point, 0.58% of total pay per paycheck gets deducted. That means an employee making $50,000 will pay $290 per year.

As Axios noted in its coverage last year, critics of the program, including Republican Reps. Joe Schmick and Peter Abbarno, say the benefit isn’t big enough to warrant the money being taken out of people’s paychecks each month.

According to KIRO 7, Abbarno previously noted that people who pay into it and move out of the state, they lose out.

“It’s really an unfair program,” Abbarno said. “It’s not portable, you retire out of state you don’t get to take it with you. If you die it doesn’t become an asset that you can pass onto a spouse or a family member.”

Destry Witt, developer of Emerald City Enhanced Services in Lakewood spent decades working in finance and senior housing. While he believes the program will be better in the future, Witt noted a typical memory care stay lasts between six and eight months.

“Right now, $36,000 is not going to go very far in a memory care facility,” Witt said to KIRO 7. “You’d be lucky if you get three or four months.”

I-2124 is another initiative that was backed by “Let’s Go Washington.”

Steve Coogan is the lead editor of MyNorthwest. You can read more of his stories here. Follow Steve on X, or email him here.