Washington Legislature approves new capital gains tax

It is certain to face a legal challenge from opponents who say the measure violates the state constitution.

By Rachel La Corte / Associated Press

OLYMPIA — A new capital gains tax on high-profit stocks, bonds and other assets was approved Sunday by the Washington Legislature and now heads to Gov. Jay Inslee for his signature.

Once signed into law, the measure is certain to face a legal challenge from opponents who say the measure is a tax on income that violates the state constitution.

The measure narrowly passed the Democratic-led Senate on a 25-24 vote Sunday afternoon, following a 52-44 vote Saturday night in the House.

“This is a step towards asking those who can pay a little more in taxes to do that for the sake of all Washingtonians, for the sake of creating a safer and healthier future for our state,” said Democratic Sen. June Robinson of Everett.

The measure would impose a 7% tax on gains from the sale of stocks, bonds, and other high-end assets in excess of $250,000 for both individuals and couples.

Original versions of the capital gains tax looked to bring in $500 million a year, but the latest version settled on by House and Senate Democrats is now expected to bring in $415 million in 2023, the first year the state would see money from the tax, which would start in 2022.

Business owners are exempt from the tax if they were regularly involved in running the business for five of the previous 10 years before they sell, own it for at least five years, and gross $10 million or less a year before the sale.

Retirement accounts, real estate, farms and forestry would be exempt from the proposed tax. One new element added to the bill during negotiations was allowing a taxpayer to deduct up to $100,000 a year from their capital gains if they made more than $250,000 in charitable donations in the same tax year.

Language added in the House says the tax is necessary “for the support of state government and its existing public institutions,” which essentially blocks a voter referendum at the ballot. Voters could go the initiative route, but it has a higher signature requirement than referendums.

Republicans argued that Democrats want the state Supreme Court to rule on the issue as it pertains to income taxation before the public can. A graduated income tax was enacted by initiative in 1932, passing with about 70% of the vote. But it was thrown out a year later by the state Supreme Court, which pointed to the state constitution’s call for uniform taxation on property.

“The intent of this bill, in my opinion, is to get it before the Supreme Court so that it can pave the way for a so-called progressive income tax in this state,” said Republican Sen. Keith Wagoner.

Talk to us

More in Northwest

The Supreme Court in Washington D.C. (AP Photo/Jacquelyn Martin)
Supreme Court limits EPA in curbing power plant emissions

This impacts how the nation’s main anti-air pollution law can be used to reduce carbon dioxide emissions.

NO CAPTION. Logo to accompany news of Washington state.
Washington state license plates prices increase July 1

The price of a new plate will rise from $10 to $50, and replacing a lost plate will increase from $10 to $30.

Hundreds gather to listen to a lineup of guest speakers during Snohomish County’s “Bans Off Our Bodies” rally Saturday, May 14, 2022, outside the county courthouse in Everett, Washington. (Ryan Berry / The Herald)
Supreme Court overturns Roe v. Wade; states can ban abortion

The decision is expected to lead to abortion bans in roughly half the states.

FILE - In this photo provided by the Washington State Department of Natural Resources, a crane and boats are anchored next to a collapsed "net pen" used by Cooke Aquaculture Pacific to farm Atlantic Salmon near Cypress Island in Washington state on Aug. 28, 2017, after a failure of the nets allowed tens of thousands of the nonnative fish to escape. A Washington state jury on Wednesday, June 22, 2022, awarded the Lummi Indian tribe $595,000 over the 2017 collapse of the net pen where Atlantic salmon were being raised, an event that elicited fears of damage to wild salmon runs and prompted the Legislature to ban the farming of the nonnative fish. (David Bergvall/Washington State Department of Natural Resources via AP, File)
Jury awards $595,000 to Lummi tribe for salmon pen collapse

The tribe sued, saying the pen owner had not reimbursed the tribal government for its clean up effort.

FILE - Alaska Airlines planes are parked at gates with Mount Rainier in the background at sunrise, on March 1, 2021, at Seattle-Tacoma International Airport in Seattle. A union has reached a deal Wednesday, June 22, 2022, with Seattle-based Alaska Airlines for a two-year contract extension that provides substantial raises for 5,300 gate agents, stores personnel and office staff, as well as for ramp workers who load cargo. (AP Photo/Ted S. Warren, File)
Alaska Airlines reaches contract deal with some workers

Raises for gate agents, stores personnel, office staff, as well as ramp workers who load cargo.

NO CAPTION. Logo to accompany news of Seattle.
Seattle facing $117 million revenue shortfall in 2023

The city’s budget chief says there’s no easy way to bridge the gap.

A view from the lower undeveloped part of the Flowery Trail neighborhood looking at spots where slash piles have been burned - outside Chewelah, Wash. (Erick Doxey / InvestigateWest)
Growing sprawl in state’s woods comes with high wildfire risk

Policymakers and homeowners are scrambling to manage the so-called “wildland-urban interface” to mitigate the threat.

The kids thought it was milk. It was actually floor sealant

In Juneau, containers of the chemical were stacked on the same pallet as boxes containing pouches of milk.

NO CAPTION. Logo to accompany news of Seattle.
Initiative to change Seattle elections heads toward ballot

The initiative would alter the way Seattle elects mayors, city attorneys and City Council members.

Lynnwood
Lynnwood climber supports first all-Black Mount Everest summit bid

Fred Campbell was part of the historic expedition, but got sick and had to turn back before the submit.

The A.J. Eisenberg Airport in Oak Harbor. (Karina Andrew / Whidbey News-Times)
Local pilot plans to buy Whidbey Island airport

Robert DeLaurentis, known as the “Zen Pilot,” submitted a letter of intent to purchase the A.J. Eisenberg Airport.