Capital Gains Taxes

The Washington Supreme Court has ruled in a 7-2 decision to uphold the constitutionality of the state's new capital gains tax. The decision filed Friday comes just weeks before taxes are due.

The lawsuit by the Opportunity for All Coalition (OFAC), which successfully fought Seattle’s high-earners income tax in 2017, was filed Thursday in Douglas County Superior Court. The plaintiffs include business owners and farmers who would potentially be subject to the new tax, as well as the Washington Farm Bureau.

Washington Gov. Jay Inslee on Tuesday signed into law a new tax on capital gains aimed at the state’s wealthiest residents. But the future of the tax is uncertain.

Just days after the Washington Legislature gave final approval to a new capital gains tax aimed at the state's wealthiest residents, the conservative Freedom Foundation has filed a lawsuit on behalf of five individuals and one couple to overturn the tax.

The Washington House has approved a bill to institute a seven percent tax on capital gains over $250,000 from the sale of such things as stocks and bonds. The 52 to 46 vote followed an hours-long debate that spanned two days.

A new state capital gains tax. An expanded and fully funded tax credit for lower-income families. Fresh investments in disaster preparation and foundational public health. And significant new spending in early learning and child care. Those are among the elements of a proposed $59.2 billion, two-year budget Washington Senate Democrats unveiled on Thursday.

Profits on the sale of stocks and bonds in excess of $250,000 would be subject to a new tax on capital gains under a bill narrowly approved Saturday by the Washington Senate. The measure passed on a 25-24 vote after more than four hours of debate in the Democratic-led chamber. Three members of the Democratic caucus voted no: Sens. Annette Cleveland, Steve Hobbs and Mark Mullet.

Even as the state of Washington’s revenue picture improves, majority Democrats in the Legislature appear committed to a course that will, one way or another, involve raising taxes this year. Not necessarily to balance a recession-era budget, but instead to reform a tax code they view as regressive and to address gaps and inequities exposed by the global pandemic.

Each of the proposals is different. But for many Democrats, as well as others on the political left, the goal is the same: Make the richest Washingtonians pay for COVID-19 relief programs and other services that would help people who are struggling. Democrats also say the state's current tax system is highly regressive, meaning lower-income people pay a larger share of their income in taxes than the wealthy. They are looking to correct that imbalance.

The tax measures are contained in the governor's two-year, $57.6 billion operating budget proposal released Thursday in advance of the 2021 Legislative session. Separately, the Democratic governor also released proposed capital construction and transportation budgets.