Capital gains tax goes before Washington Supreme Court

OLYMPIA, Wash. - The debate over a capital gains tax went before the Washington Supreme Court on Thursday, and supporters from both sides made their arguments heard during Thursday’s rally in Olympia.

Those for it want wealthy Washingtonians to pay more in taxes, while those against it say this tax violates the state constitution.

The measure has faced legal challenges since it was passed and signed into law in 2021. It creates a 7% tax on the sale of stocks, bonds and other assets in excess of $250,000.

The revenue from the tax would put over $400 million a year toward early childhood education.

The issue that's debated is what kind of tax is this: Opponents argue this is an income tax, which would be a violation of the state constitution.

"No matter what the Supreme Court decides, the facts will not change," said Jason Mercier, the government reform director for the Washington Policy Center. "Everywhere else in the world, this is classified as an income tax. And should somehow the Supreme Court allow this to go forward, Washington will stand alone."

Supporters claim this is an excise tax and because the first $250,000 are exempted, so only about 2% of Washingtonians would pay the tax. The money generated from the tax goes to the Washington education legacy fund.

"That funds K-12 education, technical schools, high schools, colleges and access to child care," said Treasure Mackley, the executive director of Invest In Washington Now. "It’s really important in terms of families getting the childcare. They need and helping to fund our education system so that every kid in Washington State can have the education that they need and deserve."

Farms, real estate and retirement accounts are all exempt from the capital gains tax. So far, the Supreme Court hasn’t made a final decision. 

The tax went into effect on Jan. 1, 2022, and the first returns are scheduled for April 18 of this year.