OLYMPIA — Washington voters could weigh in on the state’s new capital gains tax this November, after an effort to repeal it advanced Tuesday.
Conservative group Let’s Go Washington has gathered enough signatures to bring the initiative to the Legislature, the Secretary of State’s Office said Tuesday.
Let’s Go Washington, founded and bankrolled by Redmond businessman Brian Heywood, is behind the attempt to give voters a direct say in whether the capital gains tax should continue — part of a larger effort to change or repeal Democratic policies pushed through in recent years.
The capital gains tax, passed in 2021, has brought almost $900 million into state coffers since collections began last April. It represents state lawmakers’ efforts to adjust Washington’s tax code in a more progressive direction.
Next, the petition goes to state legislators, who are in the midst of a 60-day short session. Legislators could pass the repeal, pass an alternative to appear alongside the repeal on the ballot or do nothing.
They’re most likely to do nothing, in which case the repeal would appear on ballots in November.
The news of the repeal’s advancement comes a week after a yearslong lawsuit against the tax hit a dead end on Jan. 16 when the U.S. Supreme Court declined to take it up.
According to the Institute on Taxation and Economic Policy, Washington has the second-most regressive tax structure in the country, meaning that low- and moderate-income Washingtonians pay a higher share of their income toward taxes than wealthy Washingtonians do.
The capital gains tax — and the funding of a state tax credit for low- and moderate-income families — moved Washington from its former spot as the most regressive tax system in the nation to No. 2. (Florida is first).
Opponents of the tax have decried it as an income tax in disguise. The tax is 7% on the profits of a sale or exchange of assets like stocks and bonds above $250,000. There are exemptions, including for real estate transactions.
“Not only does the income tax on capital gains not have support of the law or voters, but in their own words, it’s a foot in the door for a statewide income tax,” Heywood said in a statement Tuesday. “They’re already planning to expand the tax and target more small business owners, family farms, entrepreneurs and restaurant owners. It’s time to shut the door on this for good.”
Supporters of the tax say it forces wealthy Washingtonians to pay their “fair share” to support essential services. The first $500 million in revenue collected by the tax goes toward education, and revenues above that go toward building schools.
“This initiative would steal billions of dollars in funding from early learning and education to give a tax cut to Washington’s wealthiest top 0.2%,” said Aaron Ostrom, executive director of Fuse Washington, a progressive group. “Washington’s kids deserve better than this cynical right-wing greed.”
“I’m quite confident the Legislature will not take any action to repeal it, and I’m very hopeful that the voters will not do so either,” Gov. Jay Inslee said last week. “And I think there is reason to believe that they continue to want more education funding, and this bill provides over $200 million to build more schools.”
Senate Majority Leader Andy Billig, D-Spokane, said he had “great trust in the voters to really look into the issue” and maintain the tax. He said revenues from the tax go to “vital” services including early learning education and child care, and that relatively few Washingtonians pay the tax on “very significant” profits from the sale of assets like stocks.
About 3,700 taxpayers paid the tax in 2023, the first year of collections, according to the state Department of Revenue.
Republicans in the Legislature have pushed to hold hearings on the three other initiatives that have been certified.
House Democrats have defeated Republican motions to instruct committees to hold hearings on each of the three other initiatives that have been certified by the secretary of state, said House Republican Leader Drew Stokesbary, R-Auburn, on Tuesday morning, before the initiative to repeal the capital gains tax was certified.
He pointed to the state constitution, which says initiatives “shall take precedence over all other measures in the legislature,” with an exception for appropriations bills.
“I think that is contrary to our obligation to attempt good faith compliance with the state constitution, and I have yet to hear a good reason why we shouldn’t do it,” Stokesbary said.
