So far 26 Washington House members (all Democrats to date) have signed on with House Bill 2463, which would impose a capital gains tax – but with a twist: Just capital gains over $10,000, amounts below that being exempted.
Washington doesn’t have a capital gains tax at all, which sets it out from the other Northwest states – Oregon has an upper bracket at 11% (high nationally) and Idaho at 7.8%. It’s generally tied (as in those states) to income taxes, and since Washington has no income tax, there’s no capital gains tax.
Except that this bill would add one specifically. The Washington Budget and Policy Center, which supports the bill, offers this case for it:
Capital gains are the profits people accrue from selling stocks, bonds, real estate and other assets. The proposal would create a new 5 percent excise tax on capital gains above $10,000 per year ($5,000 for single filers).
The proposal does not tax all capital gains. The first $10,000 of anyone’s yearly capital gains would be exempt from the tax. The profit from the sale of anyone’s primary residence also would be exempt.
Under the proposal, for 97 percent of Washington households there would be no tax increase at all. In fact, the richest one percent get three-quarters of all capital gains generated in the United States (see graph below).
This tax on profits from high-end financial transactions wouldn’t affect retirement savings, the sale of farmland, charitable giving, or assets left to family members as part of a will.
The idea of taxing capital gains is not new: 42 states have already figured out that capital gains are a revenue resource that makes sense. Oregon taxes capital gains at 11 percent and in Idaho the rate is 7.8 percent.
There will be a big fight, and the odds are against it. But since the day of taxes-are-off-the-table seems to be ending, it may get more of a hearing than usual.
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