Post navigation

Prev: (03/05/21) | Next: (03/07/21)

One of eight with no state income tax, Washington moves forward on plan for new tax on big capital gains

Endlessly challenged by the mix of its relatively progressive politics and a relatively paltry tax base, any shift in the mood around a statewide change in taxation is notable in Washington. Over the weekend, state senators narrowly approved a proposal that would tap into profits from massive stock and bond sales, sending the proposal onto Olympia’s Democrat-controlled House of Representatives.

The 25-24 vote moved the bill forward to create a 7% tax on the sale of stocks and bonds, personal property and businesses when annual profits exceed $250,000. Retirement accounts would be exempt.

“Our hardworking Washington families are ready for us to reform and rebuild our tax code,” primary bill sponsor Sen. June Robinson, a Democrat out of Everett, said, the AP reports. “They are asking for the wealthy few to be part of equitable investments in our state’s future.”

Washington state currently ranks 29th in the nation with a total 8.32% “tax burden” — boosted by 5.73% in sales and excise tax, the third highest total in the category in the nation. Meanwhile, it remains one of eight states without an income tax component, joined by Alaska, Wyoming, Florida, Texas, South Dakota, Nevada, and Tennessee. New Hampshire is set to become the 9th in 2024.

Washington’s tax burden ranking may be headed for change. Crosscut reports that progress on the capital gains tax joins a raft of tax proposals being pushed forward in Olympia as the state struggles with the costs of COVID-19 relief and recover, social programs, and education funding.

The capital gains tax proposal would start in 2022 and generate around $500 million a year. It now moves the state house.


THANKS! WE DID IT! 1,000 CHS SUBSCRIBERS -- We asked, you answered. Thanks for stepping up!
Support local journalism dedicated to your neighborhood. SUBSCRIBE HERE. Join to become a subscriber at $1/$5/$10 a month to help CHS provide community news with NO PAYWALL. You can also sign up for a one-time annual payment.


Subscribe and support CHS Contributors -- $1/$5/$10 per month

Subscribe
Notify of
guest
27 Comments
Inline Feedbacks
View all comments
Maralyn Tuckness
Maralyn Tuckness
2 months ago

I’m a 83 year old widow we invested in the stock market for our end times it seems STRUGGLING will be inevitable with all the proposed new taxes
Maralyn Tuckness

oliveoyl
oliveoyl
2 months ago

retirement accounts and earnings under $250,000 are exempt –

Alal
Alal
2 months ago

ya but you can afford it.

Emmylu
Emmylu
2 months ago
Reply to  Alal

You don’t know that.

James T.
James T.
2 months ago
Reply to  Emmylu

If they make over 250k, they’re fine.

btwn
btwn
2 months ago

I’m struggling a bit to see how one would struggle while selling stock with gains greater than $250,000 per year.

Russ
Russ
2 months ago
Reply to  btwn

It could be a problem if your retirement investments are in a non-retirement account (some of my retirement is in an individual account due to limits in retirement accounts), and if you haven’t paid off your home and have other expenses, you may need $20k/mo+. So you’d have a new tax then.

InvestmentAdvisor
InvestmentAdvisor
2 months ago
Reply to  btwn

Because as people retire, they need to rebalance their holdings. They sell stocks and move to safer investments like bonds. They will pay the capital gains tax at that time. There’s no exemption for seniors.

btwn
btwn
2 months ago

@russ and @investmentadvisor, I’m hearing about incremental taxes being paid, yes. I haven’t heard either of you say anything that sounds like “struggle.”

https://www2.deloitte.com/us/en/insights/economy/issues-by-the-numbers/march-2018/us-average-wealth-inequality-by-age.html

Russ
Russ
2 months ago
Reply to  btwn

Depending on when you retire, which may not be a choice, you have to have savings until about 100, which means you’re living off no income for 30+ years. That’s a very long time to plan for, and just has inherit risks, ups and downs in markets, introducing new taxes, all add to that.

Emmylu
Emmylu
2 months ago

Everyone is hurting. Capital gains are not in the financial future for most of us, so I’d rather see that than a state income tax.

Schmo
Schmo
2 months ago
Reply to  Emmylu

Yeah, @Emmylu – as long as you don’t have to contribute it’s brilliant!

Jim98122x
Jim98122x
2 months ago
Reply to  Emmylu

Would you rather keep seeing highly-paid tech workers who make $150k-200k a year and rent apartments continue not paying their fair share? A graduated fair income tax that everyone pays is way more equitable than only nailing homeowners, especially older ones who may be retired and/or whose income hasn’t risen in years. Before you say “yeah, but they own a home“– that only helps when you sell the house. It doesn’t pay you dividends like an ATM as property taxes rise. But it does chase you out of town when you can’t afford the taxes anymore. A fair income tax would hit everybody, including highly paid renters who don’t plan on staying long before they move off to their next big-bucks tech job. AND it would still capture capital gains when someone DOES sell a house– or anything else that’s sold with a big capital gain.

Nope
Nope
2 months ago
Reply to  Jim98122x

Yes but. Income taxes are unconstitutional in Washington. Until the constitution is changed, non-perfect alternatives must be substituted.

LivedInEurope
LivedInEurope
2 months ago

The state is not struggling with a revenue problem. Receipts cratered with all the covid closures last March but have since recovered.

Honestly I’m far from right wing but if the state thinks it’s delivering well on basic needs like roads safety homeless and schools, or can articulate _specifically_ what they will do with this newfound money, I’m ready for a discussion. If not, how about prioritizing current spending?

This tax is going to cause HINRY 20-40yr olds to bail for other places (Texas being a current favorite among people I know). HINRY = High Income Not Rich Yet.

Tom
Tom
2 months ago
Reply to  LivedInEurope

Bye. Texas has its own problems.

James T.
James T.
2 months ago
Reply to  LivedInEurope

The classic “I’m not right wing but”….exposed!

Alal
Alal
2 months ago

this is a tax on the sale of every small business. the “family owned” exemption is ridiculous, you have to own the business for 8 years prior to selling to be considered family owned. so if a small business owner owns a business for 7 years and sells it, they pay the tax. that is the worst part of the tax.

also, i love how they frame it as making taxation in this state more equitable, yet they don’t lower any of the inequitable taxes with this bill. it’s just another tax.

James T.
James T.
2 months ago
Reply to  Alal

Your scenario is so unlikely. Why not sell at 8 years if they are at 7? You’re nitpicking. We need this passed STAT

Alal
Alal
2 months ago
Reply to  James T.

the point is, this capital gains tax is a tax on the sale of ALL businesses, big and small by default. the “family owned” exemption only occurs if you meet the state’s definition of family owned which requires one to own the business for 8 years prior to selling. so if it is owned for 3 years or 2, 5, etc. then sold, the tax is paid. it is a regressive restraint on small business owners who find themselves in a position where they need to sell and can’t make it to 8 years.

this detail is being completely ignored. and the reason is because this is a tax on the sale of business PRIMARILY. the sale of stocks and bonds is a cover to have the image of taxing the rich (make ‘em pay) to hide the real motive of taxing the sale of all businesses. yet another tax on business. that’s all this is.

besides it is illegal as an income tax and will die in the lawsuit unless they change it to a even tax across the board for all.

Glenn
Glenn
2 months ago

At least the legislature dropped the emergency action provision from this bill, which would have prevented a citizen initiative from overturning the new law. There is no revenue emergency so the emergency provision was strictly a political tool. Once this is passed by the house and signed by the governor we will see if opponents pursue an initiative and/or relief in the courts.

Nope
Nope
2 months ago

Anything that moves away from a property tax that is only explicitly paid by about 50% of residents is a good idea. Yes it’s a component of rent, but it’s hidden and doesn’t encourage enough of the population to question its inexorable rise year after year.

ConfusedLib
ConfusedLib
2 months ago
Reply to  Nope

But this doesn’t move away from a property tax, it’s in addition to. And if you think this is going to cause the property tax rate to rise more slowly, you’re kidding yourself.

Nope
Nope
2 months ago
Reply to  ConfusedLib

One of its purposes is to offset rises in other taxes. I’ll take that to mean property tax. Another approach would be a community charge for each resident rather than property owner.

Russ
Russ
2 months ago
Reply to  Nope

If you believe that this tax is going to be used to reduce, offset or slow the rise of other taxes (besides potentially pre-empting a Seattle based capital gains tax) I have a bridge to sell you. This tax won’t affect me and it probably won’t affect most people who read this blog. Its a trojan horse – it’s a way to get people to accept a tax because its on large capital gains. Guess what – everyone except for Washington (IRS and other states) considers capital gains income – in a year or two the state is going to say – hey we have precedence for an income tax because we have had one for a while – who cares what the old rulings on the constitution were and then we are going to end up with an income tax on everyone.

I’m not here to debate whether we should have a state income tax – I don’t want one but the politicians who do should at least be honest about it. They are just boiling the frog.

Marilee
Marilee
2 months ago
Reply to  Russ

Yes I agree.

Crow
Crow
2 months ago

This is overdue. I’ll find a way to manage.