The Democrats who currently control the Legislature should uphold our state constitution by giving proper attention to Initiative 2109, which would repeal Washington’s capital gains tax. It is one of the six initiatives submitted to the Legislature by the people of Washington.
Instead, they are already attacking the initiative by defending the capital-gains income tax, using our children as their excuse. The most prominent example is from the Senate majority leader, who recently declared that the passage of Initiative 2109 would “reduce K-12 funding and devastate early learning and childcare programs.”
Wrong. Approving Initiative 2109 would simply force state government to prioritize. Sen. Lynda Wilson of Vancouver, our Senate Republican budget leader, summed it up like this when the measure was certified by the secretary of state a few weeks ago: “The capital-gains tax doesn’t pay for anything that can’t be funded with other revenue. Government can get along just fine without it, and let the people keep more of their own money.”
As background, the tax on income from capital gains was among many misguided and unnecessary pieces of legislation adopted during 2021’s locked-down legislative session. While the enabling legislation states the tax is to help meet the state’s “paramount duty,” meaning support for K-12, it’s fundamentally untrue to claim that passing Initiative 2109 would hurt K-12.
The reason is simple: Schools are going to be funded no matter what, precisely because providing for K-12 is the Legislature’s paramount duty. It’s a matter of priorities. Working families across Washington have to prioritize their spending choices, and so should legislators when determining the best use of taxpayer dollars.
Using children as a defense for a tax is one of the oldest scare tactics in the book. Instead, Democrats should explain why they thought it would be sound fiscal policy to tie such a volatile source of revenue to something as critical and fundamental as school funding.
Democrats in our state have a long history of claiming that a new tax or particular fund will “pay for schools.” That was how the proposal to create the state lottery was marketed in 1982, and taxes proposed during the current legislative term make the same claim. The truth is, most revenue generated by taxes in Washington goes into the general fund and can be appropriated for anything state government does. Again, it all boils down to priorities, as government will expand to spend every dollar it collects.
A news report headlined “Bezos Flees High-Tax Seattle for Florida, Saves $600M” illustrates how volatile the capital-gains tax is. Because the Amazon founder recently traded his Washington address for one in Florida, the Department of Revenue could not collect $140 million on a recent sale of stock by Bezos, nor can it collect an estimated $610 million in taxes on an anticipated future sale. The report also noted how, while still a Washington resident, Bezos halted what had been regular sales of Amazon stock once the income tax took effect. After all, someone as successful as him didn’t get there by making poor financial decisions.
The state Department of Revenue shows 56% of the revenue collected during the first year of the income tax came from just 10 taxpayers. Imagine if more of those taxpayers followed Bezos’ example and relocated to another state. For that reason alone, the capital-gains tax could not be more ill-suited as funding for anything considered essential.
Whether it happens while legislators are still at the Capitol or not, we should expect the opponents of Initiative 2109 to trot out excuses beyond the school-funding nonsense.
For instance, access to childcare in our state is a legitimate concern – but not because of the initiative. In my view the loss of access is due more to government regulation. And if childcare is a priority, it too should never have been tied to a volatile tax.
The Senate majority leader included a tax-the-rich comment in his recent attack on the measure, but “rich” is a subjective term. At present the income tax hits an estimated 3,300 people, but the Democrats could easily expand the net to capture more revenue. Decreasing the threshold and increasing the tax rate are common ways for government to take more money from citizens. By repealing the tax entirely, Initiative 2109 would prevent that.
Also, the supporters of the capital-gains tax may repeat their 2021 claim that it makes Washington’s tax code less “regressive,” meaning lower-income people aren’t hit so hard. That argument rings especially hollow knowing how so many Senate Democrats who voted for the tax three years ago tried very hard this year to triple the allowable growth rate of property taxes -- a tax which is regressive by definition. They were one step from voting on Senate Bill 5770 until deciding on Feb. 9 to abandon it because of fierce public and Republican opposition.
The truth is, Washington’s income tax is simply another of the money grabs driven by government greed. A tax on personal income had been proposed every year since 2010; not until the 2021 session, after the preceding election flipped a Senate seat to Democrats, did the Democratic side of the Senate finally have 25 members who would support such a tax. It was pure political opportunism, and they used K-12, early learning, and childcare as a veneer.
I will strongly support Initiative 2109 however I can, should the majority Democrats give it proper consideration while we are in session. Our state has never needed a capital-gains tax. We will do better without it.
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Sen. John Braun of Centralia serves the 20th Legislative District, which spans parts of four counties from Yelm to Vancouver. He became Senate Republican leader in 2020.
