The future of Washington's capital gains tax is on the ballot
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Washington voters will soon decide whether to repeal the state's tax on capital gains, which is paid by some of the state's wealthiest residents.
Why it matters: If voters opt to nix the tax by approving Initiative 2109, the state will lose more than $2 billion in revenue for child care programs and education over five years, according to a state fiscal analysis.
State of play: Fewer than 4,000 Washington taxpayers paid the capital gains tax last year, per the state Department of Revenue.
- About 3.8 million individual income tax returns were filed in Washington in 2021, the most recent year of IRS data available.
How it works: The 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.
- Sales of retirement accounts, real estate and certain small businesses are exempt, and the tax applies only to the portion of capital gains that exceed the $250,000 threshold.
- The first $500 million raised by the capital gains tax each year is earmarked for early learning and education programs, with anything above that going toward K-12 school construction.
What they're saying: Supporters of repealing the tax say it has made Washington less competitive and less attractive to entrepreneurs, while opening the door to broader taxation in the future.
- "The capital gains tax isn't about necessity — it's about expanding government control over your money," Hallie Balch, spokesperson for the campaign to repeal the tax, said in a video voter guide statement.
The other side: "By cutting taxes on the extremely wealthy, I-2109 will unfairly shift the bill to middle class families," Stephan Blanford, executive director of the Children's Alliance, said in a video voter guide statement urging voters to reject the initiative.
Catch up quick: Washington state lawmakers passed the capital gains tax in 2021 to try to address what many Democrats, who control both chambers of the state Legislature, called an imbalance in the state's tax code.
- Supporters of creating the new tax said the state relies too heavily on sales taxes, creating an unfair system where lower-income people pay a higher share of their income in taxes than the wealthy.
- Washington has no income tax, and court rulings have barred lawmakers from enacting graduated income taxes that target the state's highest earners.
The fine print: Voting no on I-2109 will keep the capital gains tax in place, while voting yes will repeal the tax.
What's next: Ballots will be mailed to registered voters by Oct. 18.
- They must be postmarked by Nov. 5 or returned to an official drop box by 8pm that day to be counted.