Capital gains tax clears key state Senate committee.

The Senate Ways and Means Committee passed a slimmer version of the capital gains tax proposed by Gov. Inslee as part of his budget package. SSB 5096 cleared the committee Tuesday afternoon. The bill report summarizes the proposal and changes made by the committee. Bottom line: It’s a 7% capital gains tax styled as an excise tax, unlike any other in the country. 

The Spokesman-Review reports

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.

As the S-R writes:

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.

The House is also considering a capital gains tax. 

The Everett Herald reports,

House Speaker Laurie Jinkins of Tacoma sounded like her caucus could live with the changes if and when it comes over.

“Capital gains is something we’ve wanted a long time. I actually think we may very well be OK with it,” she told reporters. “I’m also confident the courts will uphold it.”

The Columbian writes,

The measure would take effect Jan. 1, 2022 and is expected to bring in about $550 million a year. The capital gains tax — which is certain to face a court challenge if passed — has stalled in the Democratic-controlled Legislature in previous years.

 
Regardless, the tax is not required to balance the state budget, which continues to benefit from strong revenue growth. That sustained revenue growth may be put at risk by the new tax, should it pass, according to a group of tech CEOs. The Lens reports,

A letter signed by 42 tech CEOs regarding SSB 5096 offered warnings similar to those recently raised by Tanium CEO Orion Hindawi, who said Washington is experiencing a “huge PR problem” with tax discussions.

“This bill comes at a time when Washington’s startups already face a challenging market,” the letter states. “A capital gains tax would penalize founders and their employees during an already unprecedented period. 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.”

Not exactly a recovery strategy, then. More to come.