Profits on the sale of stocks and bonds in excess of $250,000 would be subject to a new tax on capital gains under a bill narrowly approved Saturday by the Washington Senate.
The measure passed on a 25-24 vote after more than four hours of debate in the Democratic-led chamber.
Backers say the tax will make the Washington tax structure more fair. While that’s unclear, what is clear is that it is not necessary to balance the state budget. There is no budget shortfall and the feds are poised to send another $350 billion in aid to state and local governments. Washington state government’s share is estimated to be $4.3 billion.
In comments to the Spokesman-Review, the Senate majority leader made clear that the increased tax revenue would be to expand government spending.
Democrats have said all session that this is the year to pass a capital gains tax, to help make up for lost revenue due to the pandemic and to further invest in other programs, such as underfunded child care issues. Spokane Democrat Andy Billig told reporters two weeks ago that it isn’t realistic to say the state’s budget is balanced and then want to fund large programs, such as the Working Families Tax Credit or child care, without new revenue.
The AP continues,
The capital gains tax has been introduced several times in previous years but has never gained traction in the Legislature. Saturday’s vote in the Senate is the furthest the idea has made it through the legislative process. Supporters of the tax say that Washington — one of just a few states without an income tax — leans too heavily on its sales tax, disproportionately affecting those with less income.
The S-R points out the next step for the bill.
The capital gains tax bill now heads to the House of Representatives for further consideration, where it will likely have the support it needs to pass.
As we’ve written before, the tax faces a legal challenge as an unconstitutional income tax. Jason Mercier, Washington Policy Center, has followed this closely. Here’s his review of Saturday’s vote, including this observation:
The House is expected to quickly approve the bill and send it to the Governor. The emergency clause was removed, however, meaning lawyers will have time to perfect their legal briefs with the expected court action taking a detour this fall for a referendum vote.
Paul Queary writes at Washington Observer,
When the Senate narrowly approved a capital gains tax on Saturday, they all but invited two challenges to the measure, should it become law: A legal argument that it violates the constitution and a referendum to force a statewide vote in November.
Yep. If the House goes along, the bill will go to the governor for his signature; he proposed a capital gains tax in his budget. Then, to the courts and/or a referendum.