In the waning hours of the 2021 legislative session which recently concluded, the state’s first-ever capital-gains tax was passed by the Legislature and is expected to be signed into law by Governor Inslee. AGC strongly opposed the measure, and thanks the hundreds of members who responded to the Action Alerts and contacted their legislators.
The bill as passed included language that seeks to prevent the tax from being voted on by voters via a referendum. It is still possible that it could be repealed by an initiative — a more difficult process than a referendum. And it is likely that the tax will be challenged in court, as opponents have long maintained that a capital-gains tax is an income tax prohibited by the state constitution.
To see the bill as passed by the Legislature, click here. SB 5096 would impose a 7% tax on capital gains above $250,000 for all to bring in an estimated $415 million in 2023, its first year. According to the bill, the tax will be levied on “the voluntary sale or exchange of stocks, bonds and other capital assets where the profit is in excess of $250,000 annually.”
SB 5096 exempts a range of assets from the tax. That list includes retirement accounts, sales of real estate, livestock, timber and certain agricultural lands. It also exempts the sale of sole proprietor businesses with a gross revenue of as much as $6 million, as well as the sale of certain auto dealerships.
The tax is estimated to raise roughly $550 million annually, beginning in fiscal year 2023. The version that passed Wednesday would put that revenue into the state’s Education Legacy Trust Account to be used for early-learning and childcare programs. While those are important programs, they could have easily been funded out of the state budget without the new tax, as the Legislature passed a 2021-23 operating budget that includes a $5 billion increase over the previous budget – from an operating budget of $55 billion for 2019-21 to a $60 billion budget for 2021-23.
The bill passed the House on a 52-44 vote, and the Senate on a 25-24 vote.
For more information, contact AGC’s chief lobbyist Jerry VanderWood.