Comment: State’s capital gains tax can do great deal of good

By Treasure Mackley / For The Herald

The Washington state Supreme Court is deciding a case about the state’s capital gains tax. On one side are thousands of students and families who will benefit from investments in child care, early learning and education. On the other are a handful of the wealthiest people in the state who want another tax cut.

This law, passed in 2021 by a majority of lawmakers in Olympia, would $500 million every year to K-12 public schools, preschools and child care. It means better outcomes for students, a more stable workforce for employers, and more jobs for workers in every county. Plus, it’s an important step in making sure the richest people in Washington pay what they truly owe in taxes.

There are some folks who like the old tax code just the way it is. It’s no surprise that a small group of them sued to overturn the capital gains tax law. They filed lawsuits in conservative Douglas County, where a Superior Court judge ruled in their favor. Some of these same folks also filed an initiative to permanently repeal the capital gains tax, but they folded their campaign in June because they simply didn’t have the financial or public support. Their friend and fellow initiative proponent Tim Eyman didn’t help their case.

The lawsuit is just another delay tactic by millionaires to avoid paying what they owe for Washington’s child care, pre-schools, and other education programs. They want to put

their own self-interests and fortunes ahead of our communities.

The state Supreme Court heard the case in late January. In doing so, they take an overdue look at Washington’s tax code, ranked as the most upside-down and unfair system by the national Institute on Taxation and Economic Policy.

Dozens of groups and individuals, including leaders of Black and brown communities, high net-worth people, teachers, tax professors, labor unions, policy experts, small business owners, parents and child-care providers, filed amicus briefs in defense of the capital gains tax, outlining reasons why the law is constitutional, necessary to fixing our racist tax code, good for the economy, and critical for investments in early learning and public education.

Our tax code over-relies on sales and property taxes to fund public services, like roads, transit, schools, hospitals and more. For low- and middle-income families, it means they pay between 11 percent and 18 percent of their income in state and local taxes. These taxpayers are feeling the biggest impact because we’re asking them to pay the most for state services we all rely on. Meanwhile, the wealthiest residents pay just 3 percent of their income, getting away with paying far less than what they truly owe.

It might seem inflammatory to say our tax code actually perpetuates racial and economic injustice, but data shows our upside-down tax is especially harmful to Black and brown people. Here’s how: for decades, policies like red-lining of neighborhoods have made it difficult for BIPOC communities to build wealth and pass it along to their heirs. At the same time, our tax code requires low-income earners to pay the highest rate of state and local taxes as a percent of their income. We’re effectively demanding those with the least ability to pay the most for public services that we all use and benefit from.

The capital gains tax is a single but important step in making our tax code more fair and less racist. It would tax profits of $250,000 or more from the sale of stocks, bonds and other assets at a modest 7 percent rate.

Fewer than 1 percent of the state’s wealthiest residents will pay this tax. Still some of the multi-millionaires who would be subject to it have sued to exempt themselves from a tax on their huge stock market windfalls.

For the rest of us, it’s a popular idea: pay what you owe, just as we do. Poll after poll after poll shows support for a capital gains tax specifically and overall agreement that the wealthiest people and biggest, most profitable corporations should pay more in taxes. There’s also a clear understanding that the middle class and working poor, as well as small businesses, pay more than our share in taxes.

What’s more, when we make sure the wealthiest Washingtonians pay what they truly owe through taxes we can fully fund our schools, ensure quality health care for anyone who needs it, and provide stability for our families.

I hope the Supreme Court agrees with Washington voters: The super rich don’t deserve any more tax breaks. What we do need is continued investment in education and other services that our communities need through a tax code that’s more fair and just.

Treasure Mackley is the executive director of Invest in Washington Now, following eight years as vice president at Planned Parenthood Votes Northwest.