OLYMPIA, Wash. — A Washington Senate committee approved a proposal for a new capital gains tax on the sale of high-profit stocks and bonds. The Ways and Means Committee passed the measure Tuesday night over Republican objections.
Similar bills introduced in recent years have not made it out of the Senate’s budget-writing committee.
The bill, Senate Bill 5096, now heads to the Rules Committee, the last stop before a potential vote by the full Senate.
The measure would impose a 7% capital gains tax on individuals and couples who make in excess of $250,000 on sales of stocks and bonds. Retirement accounts, all property sales, farms and forestry would be exempt from the tax.
The measure would take effect Jan. 1, 2022, and would be expected to bring in about $550 million a year. It would affect about 8,000 people statewide.
Bill sponsor Sen. June Robinson, D-Everett, said the majority of the revenue would go towards the expansion of early education and child care.
"People cannot go to work if they don't have these services for their families and their kids,” Robinson said.
Republicans and at least one Democrat have been opposed to the bill.
"Does anyone really believe it will stay at that level — that there won't be fewer exemptions or a higher rate in the future?” said Sen. Mark Schoesler, R-Ritzville.
Schoesler says Republicans have submitted budget proposals that do not require new taxes.
He considers a tax on capital gains to be an income tax, something prohibited by the state’s constitution.
"The bill has been whittled down, but it's still a capital gains income tax,” said Schoesler.
If passed by the Senate and House, Washington Gov. Jay Inslee is expected to sign the bill.
Inslee has proposed creating a tax on investment earners in past legislative sessions, but previous attempts have stalled before coming to the floor for a vote.
Robinson said she hopes this bill comes before the entire Senate “in the next few weeks.”
She is not afraid of it being thrown out for violating the state constitution. She said a capital gains tax is not an income tax, but an excise tax similar to a gas tax or a liquor tax.
“This is not earned income,” Robinson said. “We believe it is an excise tax, it is a tax that is paid on a transaction on the sale of stocks and bonds, and that is what an excise tax is."
A recent KING 5/SurveyUSA poll showed that a capital gains tax was supported by 59% of respondents and opposed by 30%. About 12% of respondents said they were not sure.