Gov. Jay Inslee proposed a $54.4 billion state budget that would introduce a capital gains tax on stocks, bonds and other assets.
The proposal would tax capital gains of over $25,000 for individuals and $50,000 for joint filers at a rate of 9 percent.
The tax would raise $975 million in revenue during fiscal year 2021, according to an Office of Financial Management estimate. Homes, farms, and retirement accounts are exempt.
The budget proposed by the governor will likely not be the version eventually passed by the Legislature. Although lawmakers may use it as a template, they will independently create their own proposal to create an “equitable tax situation that pays the bills,” said Rep. Timm Ormsby, D-Spokane, chair of the Appropriations Committee.
Other lawmakers see it as an attempt to circumvent voters, who have struck down ballot measures to introduce a state income tax in previous years.
“Voters in this state have repeatedly said no,” said Senate Minority Leader Sen. Mark Schoesler, R-Ritzville.
This has not deterred Democrats from seeking what they see as an acceptable budget.
“I think tax equity is still a huge issue within our caucus,” said Rep. Pat Sullivan, D-Covington.
Although Democrats currently control both legislative chambers and the executive branch of state government, the passage of an operating budget funded by revenue from taxation on capital gains is far from certain.
Senate Majority Leader Andy Billig, D-Spokane, said he wants to make sure any proposed capital gains tax makes the tax system fairer, or that it would prevent “devastating” spending cuts.
“Once we know what those things are, yeah, I could see myself supporting it,” he said at the AP Legislative Preview on Thursday. “But I would need to know what we’re getting in exchange for that capital gains tax before I could tell you 100 percent that we’ll be able to pass it.”
Washington is one of seven states with no personal income tax. Other Pacific states have some of the highest income tax rates in the nation — Hawaii and California tax at more than 10 percent — while Alaska also has no income tax.
“We’re growing our budget at a much higher rate than population and inflation rate already,” said House Minority Leader J.T. Wilcox, R-Yelm.
Wilcox acknowledges that with Democrats in the majority, they would in theory have enough votes to pass a capital gains tax. But he says it’s the job of the Republicans in the minority to make it harder for them to pass. Both sides see it as their job to represent their constituents.
Wilcox pointed out that when Republicans controlled the senate, they were able to pass measures such as freezing the cost of college tuition without a capital gains tax and can do it again.
“This is only about getting more money,” Wilcox said.