OLYMPIA – A controversial capital gains tax proposal passed out of the Senate Ways and Means committee Tuesday night, clearing its first hurdle on the way to adoption.
But the bill has changed significantly since it was first introduced.
Bill sponsor Sen. June Robinson, D-Everett, proposed an amendment Tuesday that increased the amount someone would have to earn in order to have to pay the tax and added exemptions. The new bill would apply a 7% tax on the sale of stocks and bonds, personal property and businesses, but only if those profits exceed $250,000 annually. It would not apply to the sale of a home, commercial real estate, retirement accounts and other properties. The sale of a family-owned small business that makes less than $6 million a year would also be exempt.
Democrats say the tax would only affect the top 2% of earners in the state.
“This is a key first step toward a more fair and equitable tax system,” Robinson said in a statement.
It now heads to the Rules committee where it could be pulled for a vote on the Senate floor at any point.
Gov. Jay Inslee proposed a capital gains tax in his budget, but his idea would have been a 9% tax on annual investment earnings greater than $50,000 for a married couple. His plan also had fewer exemptions.
Democrats have tried to pass a capital gains tax for years but could never get it through both chambers. Supporters say it could help make Washington’s tax structure more progressive and equitable where lower income residents aren’t paying a higher percentage of their income in taxes than high-income residents. Opponents call it an unconstitutional income tax that will almost certainly be challenged in court.
Sen. Lynda Wilson, ranking Republican on the Ways and Means Committee, said every other state calls a capital gains tax an income tax, and it’s “a very volatile one at that.”
“This bill is a classic example of the majority party cramming a very bad and unnecessary bill down the throats of Washingtonians,” Sen. Mark Schoesler, R-Ritzville, said in a statement.
Republicans introduced 22 amendments to the bill in Tuesday’s committee hearing. All of them either failed or were withdrawn.
The tax would bring the state about $550 million in revenue a year. About $350 million of that would be deposited into an account that pays for education systems, and the rest would be put into a new taxpayer relief account.
Democrats say the money would help to fund child care priorities, but Robinson said Tuesday she did not want to specify exactly where the money would go because the tax won’t go into effect for a few more years.
“It’s premature to set a specific type of tax relief or program we’re going to fund at this time,” she said.
A similar bill in the House created a capital gains tax to fund child care priorities included in the Fair Start for Kids Act. It received a public hearing last week but is currently not scheduled for a committee vote.
Supporters say the Fair Start for Kids Act would address immediate and longstanding child care issues, including increasing subsidy rates, expanding health care access to providers, reducing copays for families who use subsidies and create equity grants, among other things.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe now to get breaking news alerts in your email inbox
Get breaking news delivered to your inbox as it happens.