This usually means they know they have the votes. The state Senate is expected to vote on SB 5096 this weekend. The supporters clearly didn’t take the sage advice to slow way down.
The bill looks different from its original version, with a striking amendment being proposed by the bill sponsor.
Sponsored by Democratic Sen. June Robinson, SB 5096 originally would have been a 9% tax on gains from the sale of things such as stocks, bonds, and other assets above $25,000 for individuals, and $50,000 for couples. That would have affected about 42,000 tax payers and brought in about $975 million in the first year, according to the OFM.
But when the bill cleared Ways and Means last month, it was reduced to 7% tax on gains of $250,000 for individual and joint filers, along with several other changes, such as excluding the sale of all real estate and creating an exclusion for a “qualified family-owned small business.” Revenue from the tax would be split with the first $350 million collected a year placed in the Education Legacy Trust Account and the rest into the Tax Payer Relief account, with no specifics on how those dollars would be used…
But Robinson has attached another amendment that makes several changes, increasing the gross income threshold to qualify for the small business deduction, and eliminating the maximum number of employees allowed to qualify for that deduction. It also changes the distribution of the revenue collected, depositing the first $350 million into the Education Legacy Trust Account, $100 million into the general fund, and the remainder to the newly created Taxpayer Fairness Account.
The Washington Research Council wrote about the striker.
As I wrote last week, the bill as passed by Ways & Means would direct capital gains tax collections to two dedicated funds—thereby bypassing Washington’s constitutional rainy day fund (the budget stabilization account, or BSA). The striker would deposit the first $350 million a year into the education legacy trust account, the next $100 million into the general fund (GFS), and the remainder to the new “taxpayer fairness account.” (These amounts would be adjusted for inflation.)
The striker also adds new intent language, including this:
In an effort to both reduce the tax burden on those earning the least and to account for anticipated volatility in revenue collections from the capital gains excise tax, revenue received above base levels will be deposited into the taxpayer fairness account. Revenues deposited in this account will be used to offset existing tax burdens via policies such as funding of the working families’ tax exemption.
There is nothing in the striker that specifies what the taxpayer fairness account may be used for, or whether there would be any restrictions on its use. While it is good that the striker recognizes that the tax would be volatile, people should understand that funding for tax burden relief and the working families tax exemption would not necessarily be available every year…
Read the whole post. The WRC points out the volatility of the fund and recommends that all capital gains revenues be deposited in state general fund. Finally,
… because capital gains revenues are not dependable, legislators should avoid building budgets that rely on them.
Jason Mercier, with Washington Policy Center, reviews all the ways the capital gains tax is an income tax.
Should the Legislature adopt the capital gains tax a lawsuit is inevitable, as Mercier and others have regularly said. From MyNorthwest,
Democratic Rep. Noel Frame and others have stated they fully expect the tax to be challenged in court should it pass, but believe that’s merely the first step toward getting through the legal barriers to prove this is an excise tax and not an income tax, and then see what they have to work with to create a more balanced tax system.
“We have over 85 years of precedents from our Supreme Court telling us that it is property and therefore it would be an income tax, which would therefore make it unconstitutional,” [Republican state Sen. Lynda Wilson] continued. “So we will have a very expensive court case that could last a year or two, that the taxpayers have to pay, and then, ultimately, we know where they’re going with this and that they want to have this structure set up so that we can have a full-blown income tax.”