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Legislative leaders propose budgets with capital-gains tax revenues

The Democratic caucuses unveiled their state budget plans last week. They call for major increases in spending fueled by a new 7% capital gains income tax – opposed by AGC – and billions in federal Covid-19 relief funds. The Senate budget would spend $59.2 billion while the House budget came in a bit lower at $58 billion. Still, both spend far more than the most recent state budget, which came in at $52.4 billion just two years ago.

The Senate budget increases spending by 12.4% over the last budget. Including federal relief funds, the 2019–21 spending budget would increase by 33% over the budget approved for 2017–19. The House budget increase is 11.5% over the proposed 2019–21 revision.

The $59.2 billion two-year budget Senate proposal imposes a new capital-gains tax and draws down the Rainy Day Fund. It further spends approximately $7 billion in one-time funds from the American Rescue Plan. The Washington Research Council (WRC) has more details here.

The $58 billion House budget also creates a new tax on income from capital gains and spends billions in federal funds. Much of the spending increase is to address housing, including $920 million for rental assistance that would also help landlords who haven’t been getting paid. The WRC digs into the numbers here.

“While families across our state faced enormous financial stress and uncertainty this past year, state tax collections grew by more than 10 percent,” said Rep. Drew Stokesbary (R-31), ranking Republican on the House Appropriations Committee. “But while state revenues are strong, unemployment remains high and the state has not yet recovered roughly 200,000 of its pandemic-related job losses. I’m stunned the majority party would continue to push a job-crushing capital-gains tax at a time when we continue to face high unemployment. Our economic recovery will depend on private investors and entrepreneurs betting on Washington’s ingenuity and hard work. However convenient of a political target they may be, taxing investments and innovators is a surefire way to hamper the state’s recovery.”

Rep. Mia Gregerson (D-33), Appropriations Committee Vice Chair, said, “Our friends and neighbors have been held back and felt forgotten for too long. Parents living in poverty struggle to provide even the basic necessities for their children. Seniors feel even more isolated and alone as waiting lists and lines get longer. For too long, the most vulnerable people have been left with inadequate resources and lack of opportunity. The ‘Washington Recovery Budget’ represents the end of austerity budgets and the harmful idea that people should pick themselves up and work harder just to survive.”

AGC believes it’s unfortunate that lawmakers continue to push for a capital-gains tax when it’s clear that new taxes aren’t needed. Between soaring state tax collections (back to pre-Covid levels) and the flood of federal funding, there’s enough money coming into the state to pay for the state’s priorities without enacting a new tax.

For more information, contact AGC Chief Lobbyist Jerry VanderWood, 360.352.5000.

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