The Washington state Senate is expected to debate and vote on a bill Saturday to establish a new capital gains tax.
Bill sponsors say fewer than 1% of the state’s taxpayers would be impacted, but critics fear it is the first step towards a statewide income tax.
The tax would hit those who make more than $250,000 in annual investment earnings. Revenues would go towards early learning programs.
“This is about reforming our state’s upside-down tax system,” said Sen. Marko Liias, D-Mukilteo. “We know that our lowest income Washingtonians pay as much as 15 times more in taxes to state and local government than those at the very top.”
Republican Sen. John Braun said the state does not need a new tax, an income tax is unconstitutional in the state and voters have repeatedly rejected moves to change that.
“I would say it's a part of our culture. In Washington state, we do things different here. One thing we do different is we don't have an income tax,” Braun said.
Bill sponsors have said they consider a capital gains tax an excise tax, not an income tax.
The House of Representatives has passed capital gains tax proposals several times in recent years, but it’s never made it out of the Senate.
If the bill passes and gets Gov. Jay Inslee’s signature, both sides expect the law to end up in the state’s Supreme Court.