Jun 15, 2022 - Politics

Initiative to repeal capital gains tax fizzles out

Illustration of ballot with piece torn off.
Illustration: Rebecca Zisser/Axios

The group behind an initiative to repeal Washington's new capital-gains tax has abandoned that effort, leaving it to the courts to decide the measure's fate.

Why it matters: The capital gains tax, which Washington's Legislature approved last year, is expected to generate about $500 million annually for public education and child care programs.

  • The debate over its legality has big implications for whether state legislators can one day pursue other taxes targeting the wealthy, such as an income tax on high-earners.

Catch up quick: The 7% capital gains tax applies to profits from selling capital assets, such as stocks and bonds, if those profits exceed $250,000 per person (or per married couple) in a year.

What's happening: Supporters of the effort to repeal the tax, I-1929, announced this week that they won’t pursue the repeal initiative further.

  • Mark Funk, spokesperson for the committee behind the repeal effort, wrote in a statement emailed to Axios that "we believe the best coalition strategy is to place our confidence in the courts to overturn this illegal tax."

Flashback: An ongoing lawsuit argues that the capital-gains tax is illegal, based on past state court decisions that don't allow graduated income taxes.

Yes, but: The state attorney general’s office is appealing that ruling.

  • The state Supreme Court is expected to make the final decision.

The other side: Groups that support the capital gains tax said the real reason the initiative folded was because Washington residents don’t favor repeal.

  • "Washingtonians get it. They clearly do not support a massive tax cut for the super-rich,” said Adam Glickman, secretary-treasurer of the Service Employees International Union 775, in a press release.

What we're watching: If the tax is upheld by the courts, its opponents aren't ruling out a future ballot measure asking voters to repeal it.

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