Capital gains taxes weigh heavily in final days of regular session: A “long shot” that’s still in play

If lawmakers are to adjourn on time, budget agreement today will be critical. In the Seattle Times, Joseph O’Sullivan nicely lays out the dynamics. We’ll focus just on the budget issues. Here’s the critical dimension:

When asked Tuesday afternoon what obstacles remained to be resolved in negotiations, Sen. Christine Rolfes, the Senate Democratic budget writer, said: “Really, revenue; how to pay for things.”

Rolfes said Wednesday afternoon that lawmakers would work through the night if needed. But, she added, “Things are humming along, problems are being solved every hour.”

Both chambers have approved a graduated real estate excise tax, though in different forms, it wouldn’t be surprising to see it emerge in the final package. As Sullivan writes, it doesn’t raise enough money to get Democrats to the spending they’d like to see. And, it’s highly volatile and unreliable. But the capital gains tax endorsed by the governor and House is far from assured.

But a capital-gains proposal has always faced an uncertain fate in the Senate, where three of the chamber’s 28 Democrats late last year said they opposed the governor’s version. It would take 25 votes to pass that legislation.

KUOW reports the tax is a “probably a long shot but it’s still definitely in play.”

In a Tri-City Herald opinion piece, Washington Policy Center analyst Jason Mercier writes that the capital gains tax is part of a larger income tax agenda.

Thanks to recent committee action on the proposed capital gains income tax (HB 2156), we now know the real goal behind the proposal is to allow a graduated state income tax without a constitutional amendment.

Last Friday, on a party-line vote, the House Finance Committee rejected an amendment proposed by Rep. Brandon Vick, R-Vancouver, to prohibit the attorney general from asking the state Supreme Court to allow a graduated income tax without a constitutional amendment.

…By refusing to adopt this amendment, it is clear supporters of the income tax on capital gains are trying to set up a lawsuit in hopes judges will do what voters won’t and overturn nearly a century of case law prohibiting a graduated income tax.
Of course, to get to the court, the tax must first be approved by the Legislature.