Laurel Demkovich / The Spokesman Review
OLYMPIA – The Senate passed a capital gains tax on Saturday evening. This is the only time since it was first published six years ago that the controversial proposal has been put to a vote in the Senate.
After more than four hours of debate, the bill was passed between 25 and 24 years old despite fierce opposition from Republicans calling it an unconstitutional income tax. Three Democrats also voted against.
The first passage in the Senate is a big step towards a legislative proposal. In the past, House Democrats said they had the votes to pass it but didn’t want to send it to the Senate, where it would almost certainly fail.
The proposal has changed significantly since its inception. The version, which was passed on Saturday, would impose a 7% tax on sales of stocks and bonds, personal property and businesses, but only if those profits exceeded $ 250,000 per year. This does not apply to the sale of homes, commercial properties, retirement accounts, livestock, and other real estate. The sale of a small family business that makes less than $ 10 million a year would be exempt, as would some property sales, if the sale is also subject to a property excise tax that was passed by lawmakers two years ago.
Bill’s sponsor, Senator June Robinson, D-Everett, said the tax is the first step in resolving Washington’s regressive tax law, where lower-income residents pay a higher percentage of their income in taxes than high-income residents.
“It’s not a panacea,” she said during the floor debate. “It won’t get us there overnight, but it’s an important step forward.”
Around 9,000 tax returns across the state would be subject to capital gains tax, according to the Treasury Department. In Spokane County, that’s about 305 tax returns.
The state would receive tax revenue from 2023. This would generate revenues of approximately $ 550 million annually for the state. About $ 350 million of that will go into the government escrow for education to help fund childcare priorities contained in a Democrat-sponsored fair start bill that was also passed by the Senate on Saturday. The next $ 100,000 would go to the general fund, with the remainder going into a newly established tax equity account.
An amendment passed on Saturday removed an emergency clause on the bill that would have put the bill into effect immediately and deprived citizens of the opportunity to vote in a referendum to lift the tax. With the deportation, citizens now have the opportunity to submit a referendum to lift the tax.
Democrats have tried for years to pass a capital gains tax but have been vehemently opposed by Republicans and some moderate Democrats.
Opponents call it an unconstitutional income tax that will almost certainly be challenged in court. Senator Lynda Wilson, senior Republican on the Ways and Means Committee, said, “Every other state in the union calls it an income tax.” Republicans also argued Saturday that this tax could lead to a broader income tax across the state.
In his speech on the ground, Senator Mike Padden, R-Spokane Valley, pointed to previous Supreme Court cases of Washington repelling an income tax, as well as 10 election campaigns where voters repudiated an income tax.
“Please stop asking the question,” said Padden. “The question has been resolved.”
However, Democrats say the bill will stand up in court. Just postpone the implementation of the bill, which they think could help make Washington’s tax structure more progressive and fairer if lower-income residents don’t pay a higher percentage of their income in taxes than high-income residents.
“Enough is enough,” said Senator Rebecca Saldaña, D-Seattle, on the floor. “We have known for many years that our Washington tax laws are upside down.”
Senate minority chairman John Braun said Saturday the state cannot fix the tax system by raising more money, regardless of who is contributing it.
“What you need to do to make the system fairer is reduce the tax burden on those on the end of the spectrum,” he said.
Senator Jeff Holy, R-Cheney, said east Washington has not experienced the same economic growth as King County and west Washington. Spokane is experiencing some growth right now, he said, and many people don’t want this tax as it could cause businesses in the area to leave for Idaho or prevent new businesses from getting in.
“This is not King County,” he said. “This is not west of the Cascades.”
In addition to rejecting the proposal, Republicans criticized the Democrats for raising the proposal and telling amendments late, leaving little time for contributions.
Padden said the proposal was probably “the most important piece of legislation for this entire session and there should have been more time to work the details in committee”.
“You want to make sure you’re getting it right,” he said as he spoke against the bill.
Robinson said she was taking input from Republican colleagues and opponents of the bill as she was writing and rewriting the bill.
Democrats have said throughout the session that this will be the year to pass a capital gains tax, make up for lost revenue from the pandemic, and make further investments in other programs like underfunded childcare issues. Spokane Democrat Andy Billig told reporters two weeks ago that it wasn’t realistic to say that the state budget was balanced and then wanted to fund large programs like the working family tax credit or childcare with no new income.
“The question is, do we want to do what is absolutely necessary or is this the moment when we actually invest?” Said cheap.
Wilson said Saturday that while Democrats want to use this tax on long-term investments, it is “the most volatile tax” making it difficult to fund long-term priorities.
Opponents of the bill say the state is likely to expect a revenue boost in the March 17 revenue forecast, which lawmakers will use to draw up the budget. The state is also likely to receive a hefty payout from the federal government if the $ 1.9 trillion stimulus plan is soon passed by Congress. Most of the money, however, is used for one-time COVID-19 costs.
“Why are we doing this now?” Wilson said on the floor. “Why do we decide to put another tax on taxpayers here in Washington?”
With half of the session left, a vote on a tax at the beginning of the session is a bit unusual for lawmakers, who often vote on taxes and the final budget in the final days of the session.
The Capital Gains Tax Act is now being sent to the House of Representatives for further review, where it will likely get the support it needs to get passed.
“Fifty percent of the legislative process has yet to continue as this goes to the other body,” Billig said on the floor. “We’ll keep working on the details.”