In 2021, politicians in Olympia introduced a new capital gains tax, claiming it would support public education and childcare programs. Unfortunately, this tax threatens to damage Washington’s small businesses and tech sector while doing little to address the deep-rooted issues plaguing the state’s K-12 education system. Worse yet, Olympia lawmakers have already made their intent to expand the tax clear. This November, voting yes on Initiative 2109 is essential to protect Washingtonians from this creeping income tax.
According to the IRS and the dictionary, capital gains are a form of income, which is why all other states treat their capital gains taxes as income taxes. Washington state’s constitution restricts such taxation, so the state Supreme Court labeled this tax an “excise tax” to bypass the state’s prohibition. In reality, this is a thinly veiled attempt to impose an income tax by other means. Public records revealed that state politicians knew exactly what they were doing — Sen. Jamie Pedersen confirmed time and again that he and some of his colleagues plan to expand the tax to all Washingtonians without needing a vote of the people.
This isn’t the first time Washington voters have encountered such a scheme. The public has rejected income tax proposals a staggering 11 times. I-2109 offers a solution by preventing politicians from sneaking an income tax past voters yet again.
At first glance, the new capital gains tax might seem limited, affecting only the wealthiest residents. As it currently stands, the tax applies to profits exceeding $250,000 from the sale of qualifying assets. However, Olympia lawmakers are already planning to expand it. Senate Bill 5335 proposed lowering the threshold to just $15,000 and increasing the tax rate from 7% to 8.5%. Although home sales and retirement accounts are exempt for now, the state’s track record suggests it’s only a matter of time before lawmakers broaden the tax to include more sources of income.
The capital gains tax is especially unfair to small business owners, many of whom have poured their lives into building their companies. During tough times like the COVID-19 pandemic, these entrepreneurs often sacrificed their paychecks to keep their businesses afloat and take care of their employees. For many, selling their business is the only way they can afford to retire. This new tax makes it harder for them to do so, meaning they’ll have to work even longer before enjoying the retirement they’ve earned. I-2109 would protect small business owners from this added burden.
The tech sector, a vital driver of Washington’s economy, is also at risk. Washington’s friendly tax policies have historically attracted some of the world’s most innovative companies. In fact, Amazon was founded here in part because of the state’s business-friendly environment. If the capital gains tax remains in place, it will penalize success, drive talent away, and discourage future entrepreneurs from choosing Washington as their home. It’s worth considering: what would Washington’s economy look like today if Amazon had decided to establish its headquarters elsewhere?
Wealthy individuals and business owners are highly mobile, and when taxes become too burdensome, they can — and do — relocate to more tax-friendly states. This migration is no hypothetical scenario; it’s already happening. Jeff Bezos, Fisher Investments and countless others have already left the state. They have taken the jobs they created, the money they invested into our local economies, and new opportunities for growth with them.
Olympia didn’t need to impose this new tax in the first place. Over the past five years, Washington has enjoyed a $19 billion budget surplus. There was already more than enough money to fund education and childcare programs without placing additional financial burdens on citizens. Voting yes on I-2109 will hold lawmakers accountable to prioritize spending and use existing funds more efficiently — rather than relying on new taxes to solve old problems.
This November, the choice is straightforward. Voting yes on I-2109 protects Washington’s future by rejecting unnecessary taxation, safeguarding small businesses and entrepreneurs, and keeping the state’s economy vibrant. It ensures that Washington remains a place where innovation thrives, opportunities abound, and hard-working people can retire with dignity.
I-2109 will protect small businesses, ensure the tech sector continues to thrive, and prevent everyday Washingtonians from being saddled with an income tax in the future. Don’t let Olympia chip away at Washington’s no-income-tax tradition. Vote yes on I-2109 to protect your financial future and the future of our state. Together, we can keep Washington a land of opportunity — for everyone.
