Capital Gains Tax Heads to Inslee's Desk After Passage in Washington Legislature

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OLYMPIA — A 7% tax on the sale of some investments passed the Legislature on Sunday, after a years-long push by Gov. Jay Inslee and Democrats.

The controversial capital gains tax has been the subject for debate throughout the session with supporters saying it is a step toward improving the state's regressive tax code and opponents calling it an unconstitutional income tax.

The Senate gave its final approval with a 25-24 vote. Gov. Jay Inslee is expected to sign the bill into law.

"This is a step towards asking those who can pay a little more in taxes to do that for the sake of all Washingtonians," Sen. June Robinson, D-Everett, said.

The bill would implement a 7% tax on the sale of stocks, bonds, some property, businesses and other investments, if the profits exceed $250,000 annually.

There are exceptions, including the sale of all real estate, livestock and small family-owned businesses. A small family-owned business is one owned for at least five years and makes less than $10 million a year.

Democrats' final budget proposal accounts for $415 million in revenue from the tax, which would go toward child care priorities. Revenue would begin coming to the state in 2023.

Opponents say it is a type of income tax, which would be unconstitutional under the state constitution. It will almost certainly be challenged in court before it goes into effect.

"The minute this passes, there will be a lawsuit," Sen. Lynda Wilson, R-Vancouver, said.

The bill has language attached to it that makes it "necessary for the support of the state government and its existing public institutions." That line could prevent voters from bringing a referendum on the tax to the ballot in attempt to repeal it.

Democrats said the funds from the tax are necessary to fund the budget and the expansion of child care as part of that. Republicans said it is just a way to prevent voters from bringing forth a referendum.

"What frustrates me the most is that this bill before us is not necessary," Sen. Shelly Short, R-Addy, said

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