Washington Gov. Jay Inslee (center) after he signed a bill into law in Tukwila on May 4, 2021, that levies a new capital gains tax on high-profit stocks, bonds and other assets for some residents of Washington. (AP Photo/Ted S. Warren, file)

Washington Gov. Jay Inslee (center) after he signed a bill into law in Tukwila on May 4, 2021, that levies a new capital gains tax on high-profit stocks, bonds and other assets for some residents of Washington. (AP Photo/Ted S. Warren, file)

Judge clears way for initiative to repeal capital gains tax

I-1929 sponsors are silent on when, or if, they will gather signatures. Opponents are gearing up for a ballot battle.

OLYMPIA — A Thurston County judge cleared the way Thursday for opponents of the state’s new capital gains tax to begin gathering signatures on an initiative to repeal the law.

Sponsors of Initiative 1929 got the green light after Thurston County Superior Court Judge Indu Thomas approved final wording for how the measure would be described on the ballot and the initiative petitions.

However, it wasn’t immediately clear when, or if, they would proceed with collecting signatures.

“We don’t comment on that,” said Mark Funk, a spokesman for Repeal the Capital Gains Income Tax, the political committee behind I-1929.

Supporters of the capital gains tax expect it will happen in the next few days. They launched a barrage of verbal salvos Thursday.

“Washington already has the most upside-down tax system in the nation and passage of I-1929 would allow the ultra-wealthy to tip that scale even more in their favor by creating a new loophole so they can avoid paying taxes on their windfall profits,” said Misha Werschkul, executive director of the Washington State Budget & Policy Center, a non-partisan research organization.

At issue is a law signed by Gov. Jay Inslee in May 2021. It took effect Jan. 1, and it’s projected to generate $415 million for early learning and child care programs in 2023, the first year of collections.

Under the law, a capital gains tax will be levied on annual profits reaped from the sale of long-term assets, such as stocks and bonds, for some individuals and married couples. The state will collect 7% of those profits above $250,000. The law contains exemptions for retirement accounts, real estate and some agricultural and small businesses.

An estimated 7,000 taxpayers could be subject to the new tax, according to a 2021 fiscal analysis.

Initiative 1929 would erase the 2021 law from the books.

Sponsors will have to work rapidly if they want to get the measure on the November ballot.

To qualify, they must collect and turn in signatures of 324,516 registered Washington voters by 5 p.m. July 8. They will need to turn in closer to 400,000 signatures to account for invalid or duplicate signatures.

It’s doable. In 2018, backers of Initiative 1639 gathered 378,ooo signatures in a month to get on the ballot. Voters did approve the measure, which contained several new gun-related restrictions, including boosting the legal age for buying a semiautomatic assault rifle.

Should I-1929 petitions get circulated, opponents won’t be sitting idly by. They set up a hotline Thursday that people can call to report where they see signature-gatherers at work. It’s possible they may deploy people to those sites to provide a visual and verbal counterpoint.

“We are going to make it as expensive and uncomfortable for them as possible,” said Heather Weiner, a spokeswoman for Invest in Washington Now, which is part of a coalition of opposition groups. “We will not interfere with them. We also want to make sure people have the facts.”

This has the makings of an expensive ballot battle.

As of Wednesday, Repeal the Capital Gains Income Tax had reported raising $259,000, including $100,000 from Stan Baty, a founder and general partner at Columbia Pacific Advisors in Seattle. It has lined up $470,000 in pledges, according to reports filed with the Public Disclosure Commission.

Sponsors also had spent most of what they raised, including $70,000 to Moore Information Group for polling research and roughly $71,000 to consultants.

No Tax Cut for the Super Rich, the political committee for initiative foes, had collected and spent roughly $32,000 as of Thursday, according to reports. It has lined up $200,000 in pledges.

Meanwhile, a lawsuit challenging the legality of the capital gains tax is making its way through the courts.

In March, Douglas County Superior Court Judge Brian Huber ruled it is an unconstitutional tax on income.

In his decision, Huber cited several elements of the law that he said “show the hallmarks of an income tax rather than an excise tax,” including a reliance on federal IRS tax returns that must be filed by Washington residents; the fact it is levied annually instead of at the time of the transaction; and that it is based on an aggregate calculation of capital gains over the course of a year.

Huber also noted that like “an income tax and unlike an excise tax,” the capital gains tax statute allows a deduction for certain charitable donations the taxpayer makes during the tax year.

Attorney General Bob Ferguson said at the time that his office would appeal to the state Supreme Court.

“There’s a great deal at stake in this case, including funding for early learning, child care programs and school construction,” he said. “Consequently, we will continue defending this law enacted by the peoples’ representatives in the Legislature.”

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com; Twitter: @dospueblos.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A firefighter stands in silence before a panel bearing the names of L. John Regelbrugge and Kris Regelbrugge during the ten-year remembrance of the Oso landslide on Friday, March 22, 2024, at the Oso Landslide Memorial in Oso, Washington. (Ryan Berry / The Herald)
‘Flood of emotions’ as Oso Landslide Memorial opens on 10th anniversary

Friends, family and first responders held a moment of silence at 10:37 a.m. at the new 2-acre memorial off Highway 530.

Julie Petersen poses for a photo with images of her sister Christina Jefferds and Jefferds’ grand daughter Sanoah Violet Huestis next to a memorial for Sanoah at her home on March 20, 2024 in Arlington, Washington. Peterson wears her sister’s favorite color and one of her bangles. (Annie Barker / The Herald)
‘It just all came down’: An oral history of the Oso mudslide

Ten years later, The Daily Herald spoke with dozens of people — first responders, family, survivors — touched by the deadliest slide in U.S. history.

Victims of the Oso mudslide on March 22, 2014. (Courtesy photos)
Remembering the 43 lives lost in the Oso mudslide

The slide wiped out a neighborhood along Highway 530 in 2014. “Even though you feel like you’re alone in your grief, you’re really not.”

Director Lucia Schmit, right, and Deputy Director Dara Salmon inside the Snohomish County Department of Emergency Management on Friday, March 8, 2024, in Everett, Washington. (Ryan Berry / The Herald)
How Oso slide changed local emergency response ‘on virtually every level’

“In a decade, we have just really, really advanced,” through hard-earned lessons applied to the pandemic, floods and opioids.

Ron and Gail Thompson at their home on Monday, March 4, 2024 in Oso, Washington. (Olivia Vanni / The Herald)
In shadow of scarred Oso hillside, mudslide’s wounds still feel fresh

Locals reflected on living with grief and finding meaning in the wake of a catastrophe “nothing like you can ever imagine” in 2014.

The rezoned property, seen here from the Hillside Vista luxury development, is surrounded on two sides by modern neighborhoods Monday, March 25, 2024, in Lake Stevens, Washington. (Ryan Berry / The Herald)
Despite petition, Lake Stevens OKs rezone for new 96-home development

The change faced resistance from some residents, who worried about the effects of more density in the neighborhood.

Rep. Suzan DelBene, left, introduces Xichitl Torres Small, center, Undersecretary for Rural Development with the U.S. Department of Agriculture during a talk at Thomas Family Farms on Monday, April 3, 2023, in Snohomish, Washington. (Olivia Vanni / The Herald)
Under new federal program, Washingtonians can file taxes for free

At a press conference Wednesday, U.S. Rep. Suzan DelBene called the Direct File program safe, easy and secure.

Former Snohomish County sheriff’s deputy Jeremie Zeller appears in court for sentencing on multiple counts of misdemeanor theft Wednesday, March 27, 2024, at Snohomish County Superior Court in Everett, Washington. (Ryan Berry / The Herald)
Ex-sheriff’s deputy sentenced to 1 week of jail time for hardware theft

Jeremie Zeller, 47, stole merchandise from Home Depot in south Everett, where he worked overtime as a security guard.

Everett
11 months later, Lake Stevens man charged in fatal Casino Road shooting

Malik Fulson is accused of shooting Joseph Haderlie to death in the parking lot at the Crystal Springs Apartments last April.

T.J. Peters testifies during the murder trial of Alan Dean at the Snohomish County Courthouse on Tuesday, March 26, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Bothell cold case trial now in jury’s hands

In court this week, the ex-boyfriend of Melissa Lee denied any role in her death. The defendant, Alan Dean, didn’t testify.

A speed camera facing west along 220th Street Southwest on Tuesday, Nov. 21, 2023 in Edmonds, Washington. (Olivia Vanni / The Herald)
New Washington law will allow traffic cams on more city, county roads

The move, led by a Snohomish County Democrat, comes as roadway deaths in the state have hit historic highs.

Mrs. Hildenbrand runs through a spelling exercise with her first grade class on the classroom’s Boxlight interactive display board funded by a pervious tech levy on Tuesday, March 19, 2024 in Marysville, Washington. (Olivia Vanni / The Herald)
Lakewood School District’s new levy pitch: This time, it won’t raise taxes

After two levies failed, the district went back to the drawing board, with one levy that would increase taxes and another that would not.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.