Washington voters will soon have an opportunity to have their say on an unusual and corrosive tax the Legislature passed in 2021. The controversial tax imposes a levy of 7% on capital gains income over $250,000. While that seems like it would only apply to “the rich,” the Legislature has already proposed expanding the tax until it hits working-class incomes.
Here’s how got where we are now. Three years ago, lawmakers passed and Gov. Jay Inslee signed Senate Bill 5096, creating the first-ever tax on capital gains income.
Based on multiple precedents from the Washington State Supreme Court, the law was unconstitutional. The state constitution bans a state income tax except under rare conditions. Democrats got around this provision by labeling the income tax as an “excise” tax. The state supreme court, in a split decision that overturned its own rulings, accepted this rhetorical maneuver.
In response, concerned citizens collected over 454,000 signatures to send Initiative 2109, which would repeal the capital gains income tax, to the Legislature. Democratic leaders, fearing the initiative would receive a majority if legislators were allowed to vote on it, blocked the measure, saying they thought it would “cost” the state too much money. Their decision means the people get to vote on Initiative 2109 directly.