The Seattle Times ran a column earlier this week marveling that Washington's capital gains tax smashed a revenue record even as the wealthy are said to be leaving. Preliminary returns for fiscal 2026 came in at roughly $1.5 billion, about $750 million above the February forecast and far above the $584 million collected the year before. The piece mostly reads as a rebuttal to anyone skeptical of taxing the rich due to fears of wealth flight.
Set aside who is staying and who is leaving. The revenue showed up, and that is worth saying plainly. The impact of the barrage of recent tax increases is likely to be felt over time, not all in the first few years. It is clear that businesses and wealthy people are leaving, but it takes time for the impact of that to be felt. But revenue was never the problem in Olympia, and this is one more data point confirming it.
The column ends with the much more important question for the future of our state: will state government use this money well? On that score, the record is not encouraging. That surprise $750 million in collections is likely to close less than 10% of the roughly $7-$10 billion shortfall the state is projected to face.
If a windfall this large barely makes a dent in our budget deficit, the gap was never created by weak revenue. Total state tax collections have more than doubled over the past decade, the capital gains tax is now outperforming forecasts by nearly 100%, and the budget remains in structural deficit.
When I analyzed the income tax earlier this year, the problem was never whether it would raise money. The problem was that, under Washington's historical spending trajectory, the new revenue would be consumed by dinner, while lawmakers kept spending on dessert, tea, and a midnight snack.
So, credit the column for asking whether Olympia will spend wisely. The unfortunate truth is that we already know the answer. A record-smashing capital gains haul that covers less than 10% of the problem is not proof that the rich paying their “fair share” will bring us out of persistent budget deficits. It is proof that Washington has a spending problem, and historical tax increases and revenue collections will not fix the state budget unless lawmakers begin to reckon with that fact.
