Washington Rep: Capital gains tax is just ‘parity in the tax code’

The big debate regarding a capital gains tax continues in Olympia, with some critics arguing that it’s an income tax, which potentially means court challenges ahead. Democratic Representative Noel Frame joined the Dori Monson Show to debate Dori on the reasoning behind the effort and how she believes it differentiates from an income tax.

“We’re having a conversation about a capital gains tax, which in Washington state law is considered an excise tax. What I think a good comparison is we talk about different types of property in Washington state. When you sell your house, which is real property, you pay a real estate excise tax,” she said.

“When you sell a capital asset like a financial intangible asset, like a stock or a bond, right now, you pay 0% on that sale. This capital gains tax, that is the transaction on that sale that is very comparable to the real estate excise tax that middle class people already pay on their one asset of wealth, their home. So it’s just, again, parity in the tax code,” she continued. “And so we really do believe it is an excise tax.”

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As Dori argued, the question of whether a capital gains tax is an income tax was posed by a state representative to the IRS, and they responded: “You ask whether tax on capital gains is considered an excise tax or an income tax. It is an income tax,” Dori read.

“The IRS does not control and dictate what state tax law is, and as a state tax law it is an excise tax,” Rep. Frame responded. “So, Dori, this is something that is going to be fought over in the courts, I have no doubt. But right now, you’re talking about a tax that will affect literally less than 1% of Washingtonians, 0.23% actually.”

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“And we think it is a key tool of reform to the tax code to have some of the wealthiest Washingtonians really, again, pay their fair share,” Frame said. “And hopefully, as you’ll see, we actually put in the bill that some of these funds go toward the working families tax credit, a great bipartisan piece of legislation that we’ve already passed out of the House, House Bill 1297. Some of these funds will go toward that tax credit for working families. So we really think it’s a key tool of reform.”

Listen to the Dori Monson Show weekday afternoons from noon – 3 p.m. on KIRO Radio, 97.3 FM. Subscribe to the podcast here.