An initiative to repeal the state’s capital gains tax would cost the state nearly $6 billion in education funding through 2029, according to a fiscal note for the proposal.
The estimate, released on Feb. 5 and prepared by the Office of Fiscal Management, showed the Initiative 2109 would cut $5.66 billion earmarked for education.
The 7% tax, passed by the Legislature in 2021, applies to earnings over $250,000 a year on long-term capital assets such as bonds and stocks.
When signing the bill into law, Gov. Jay Inslee estimated that less than 1 percent (.23%) of Washingtonians would pay the tax. Forty-one other states, and the District of Columbia, tax capital gains.
If passed, I-2109 would cost the state $1.6 billion in revenue through fiscal year 2025, $1.92 billion in revenue between fiscal years 2025 and 2027 and $2.13 billion in revenue between fiscal years 2027 and 2029.
In a video update released Tuesday, Sen. Drew MacEwen, R-Shelton, said Olympia “has an unquenchable thirst for more revenue and it’s time to say ‘enough is enough.’”
Fiscal notes on three other initiatives — the prohibition of a state income tax, a parental bill of rights and reforming police pursuit requirements — show the proposals would have minimal to no impact on the state’s budget.
As of 9:30 a.m. Friday, fiscal notes on proposals to repeal sections of the Climate Commitment Act and to allow residents to opt out of the state’s long-term care program were not available.
All six initiatives to the Legislature have been certified by the Secretary of State. If legislators fail to act on the initiatives during the current legislative session, they would appear on the November 2024 ballot.
“Bureaucratic fiscal notes always reflect bias. This one does, too. I-2109 doesn’t reduce funding for education at all. Zero,” GOP Chairman Jim Walsh said in a statement to The Chronicle Friday. “The state government has doubled its spending in a decade and it is still running billion-dollar budget surpluses.”
In recent weeks, Republicans have called on Democrats to hold committee hearings on all six initiatives. Though Democratic leadership did not hold their weekly press availability Tuesday, members indicated last week they sought additional information before charting a path forward.
“We’ve been having a lot of conversations about that, about what the right path forward is,” Sen. Emily Randall, D-Bremerton, said on Jan. 30. “Both for success for the policies that we’ve passed, but also, to preserve the investments that we’ve made in communities all across this state.”
Last week, demonstrators held a rally on the steps of the state Capitol at an event hosted by conservative podcaster Brandi Kruse that featured several Southwest Washington lawmakers in a call for hearings.
Walsh said at the rally that Washington must “regain the great trait” of fiscal conservatism and pushed back on the influence of Brian Heywood, a millionaire who spent more than $6 million on paid signature gathering campaigns for the initiatives.
“Don’t let the media say it’s one person, don’t let the media disparage this, about going decades,” Walsh said. “We need to restore what’s good. That’s what this project is about. It’s about fixing what’s good and reclaiming the good.”
On Friday, Walsh said “I-2109 compels Olympia to be more disciplined and to make better priority decisions on how it spends taxpayers’ money.
“For 40 years, tax-and-spend liberals in this state have been masking their wasteful schemes behind ‘the children.’ Ordinary people in Washington are tired of these lies,” Walsh said in a statement. “It’s time for real tax reform in Olympia, time for real budget reform. That’s why so many common-sense Washingtonians support I-2109.”
Though he stopped short of “advocating” a position on the Initiative, Gov. Jay Inslee highlighted the state’s capital gains tax during a Jan. 19 visit to a domestic violence advocacy organization in Centralia, saying funding from the program “may not go directly to these services, but when you reduce these resources, it means you have to make it up somewhere.”
“Right now, a lot of that money is going to school construction,” Inslee said on Jan. 19. “But if we lose $200 million to school construction, we’ve got to make it up somehow.”
