(The Center Square) — Washington's first capital gains tax is one step closer to becoming law after surviving two dozen amendments by the Senate Ways and Means Committee on Tuesday.
“It’s a reasonable way of asking those wealthy few to join the rest of us in building a stronger, healthier state for all Washingtonians, a state in which they have thrived,” Robinson said.
The substitute bill effectively lowers the capital gains tax rate from 9% to 7% thanks to a striking amendment adopted earlier this month. It also includes an across the board exemption for all real estate, commercial and residential.
Under the new proposal, the threshold would be raised to capital gains in excess of $250,000, $25,000 for individuals and over $50,000 for couples.
The first $350 million made from the capital gains tax each year would go towards the state's education legacy trust account and set aside the remainder for a taxpayer relief account.
By contrast, the capital gains tax proposed by Gov. Jay Inslee in December is estimated to raise $875 million per year at a rate of 9% on stocks, bonds, and commercial real estate.
The bill passed the Democratic-controlled Senate Ways and Means Committee on Tuesday by a party-line vote of 13 to 10.
Of the 22 amendments considered in committee, 20 came from ranking member Sen. Lynda Wilson, R-Vancouver. They included sending the capital gains tax to voters and delaying it until it could be reviewed by a tax structure work group.
The bill has already drawn opposition from 42 tech CEOs who warned in a letter sent to the Senate Ways and Means Committee that a capital gains tax could spur a mass corporate exodus.
"A capital gains tax would penalize founders and their employees during an already unprecedented period," the letter states. "Taxing those gains penalizes employees and encourages founders to form their companies in other states, or to relocate to states that do not have a capital gains tax. The result will be a loss of jobs and economic vitality in our region."
Washington Republicans have also drawn a line in the sand against passing new taxes this session, arguing the state can and should dip into its $1.6 billion in cash reserves to keep the lights on.
Earlier this month, the Washington GOP released its own $55 billion two-year budget on par with Inslee's own $57.6 billion save for no new taxes.
According to state economists, state revenue as of February 10 came in at $269.5 million, or 15.3% higher than forecasted in November.
State revenue is still projected to remain $3.3 billion below pre-pandemic levels for the next three years, however. That number is nearly $6 billion lower than the state's three-year revenue forecast from last summer.
Democrats and progressives have said in turn that the state faces a number of costly infrastructure projects like the West Seattle Bridge and closing its 225,000 unit housing deficit. Plus, taxing high-income earners will help offset the state's sales tax on lower-income earners, they argue.
A recent KING 5/SurveyUSA poll showed 59% of 650 respondents supported a capital gains tax while 30% oppose and 12% of respondents were unsure. The poll had a 4 point margin of error.
SB 5096 is part of a hard push for Democratic tax reform this session which includes a similar capital gains tax to fund child care, a wealth tax, raising the estate tax, and a drafted proposal for a statewide payroll tax.
If passed by state lawmakers, a capital gains tax will likely have to survive a tsunami of constitutional hurdles and litigation from wealthy taxpayers.
The bill awaits action by the Rules Committee, which declined on Wednesday to move it to the Senate floor calendar for a vote.