The renewed threat of capital gains tax coming into Washington state is making local lawmakers suspicious of what it could mean for residents if a governor-sponsored plan is carried out this time around.
During a virtual town hall on March 15, lawmakers in Washington’s 17th legislative district discussed the tax proposal under a number of issues raised by questions from constituents. In addition to talks about attempts to curb Governor Jay Inslee’s emergency powers, the state’s reopening plan, and possible electoral fraud, questions about taxation were primarily in the context of the City Hall, particularly with regard to Senate Draft 5096.
If approved, Senate Bill SB 5096 would impose a tax of “7 percent of a person’s capital gains on long-term capital” over $ 250,000. Tax exemptions include all real estate, retirement assets, and livestock for those who earn half their gross income from farming or ranching, among other things, with stock and pension taxation being one of the most commonly cited ways the bill would generate income.
Washington State Senator Lynda Wilson and Republicans Vicki Kraft and Paul Harris, all Republicans from Vancouver, rejected the tax proposal. Wilson said it was disappointing to see SB 5096 passed in the Senate between March 25 and 24, adding that there was reason to believe that the legislation would “create a structure (for) a full income tax.” “.
“The problem with capital gains tax is that it’s unconstitutional because it’s an income tax and because it’s unequal,” said Wilson.
Kraft said the Democratic Legislature classified HB 5096’s capital gains tax as an excise tax, but during a House Finance Committee hearing that day, “it was very quick and clear that this (bill) was an income tax.” She kept saying that Washington residents had shown their opposition to the introduction of any income tax
According to a Senate bill, Washington State Department of the Treasury will have to adjust the current $ 250,000 standard deduction from 2024, “the global gross income of a qualified family business,” and annual tax revenue based on the prevailing consumer price index for the Seattle area. Kraft said this was comparable to adjusting the “guard rails” to the scope of the tax.
“Obviously, they’ll widen the guard rails, and ultimately it’ll be a state income tax,” Kraft noted.
Harris said the Democrats are “now a little more honest” in their dialogue about what they want the legislation to do, from saying that funding is necessary to saying they want more of a scrutiny of the state’s tax structure.
“Let’s have the dialogue, let’s literally talk about our tax structure in our state,” said Harris, but trying to “impose what is probably the most volatile tax there is” – one on capital gains – would be a bad idea. He said the tax would adversely affect those who would be subject to the tax, such as: B. stockbroker, and would not bring in what was expected.
“If you believe that they will stay in our state and continue to act as they did, they will not,” Harris said.
“We never talk about getting rid of taxes, we just talk about adding taxes,” noted Harris. Wilson later added that the Federal American Rescue Plan Act would prevent tax cuts until December 2024.
Wilson said federal funding from the law would mean roughly $ 15 billion would flow into Washington state, of which $ 4.25 billion could be used on COVID-19-related issues. She noted a government revenue forecast due to be released later in the week. Following its release, her office said in a statement that “there has been a surprisingly large increase of $ 3.3 billion in the current two-year fiscal cycle and $ 5.2 billion in the next four years.”
Despite the relatively rosy financial picture, Wilson said she was “overwhelmed” by the types of bills introduced at that meeting and said there were 21 bills related to taxes alone. Those bills included an increase in estate tax to 40 percent for some, a 1 percent “property tax” on household wealth after $ 1 billion, and wage, beverage and carbon taxes, Wilson said.
“The fact is we don’t need them,” Wilson said of the tax proposals. Your colleagues agreed.
“The need for new taxes, which was an issue at Olympia this year, is definitely not needed right now,” said Kraft.
Wilson said there is a tax structure working group that has been meeting for more than a year to study Washington’s tax legislation. The group consists of members of the legislature from both parties, as well as representatives from city and county lobby groups, the governor’s office and the treasury.
Despite the group’s existence, nearly two dozen tax proposals have still been tabled during this legislature, Wilson noted.
Wilson said that removing an emergency clause in accounting language would allow SB 5096 to participate in a voter referendum. She said the bill, if implemented, would raise an estimated $ 550 million in the first year, though the funds could not be used until April 2023.
Kraft noted that the bill was exempt from review by the Joint Legislative Audit and Review Committee (JLARC), which could be used to assess the performance of the tax.
“(Bill proponent) it doesn’t matter how it goes or not, they just want the tax and they want the income tax,” Kraft noted.