WAVotes NEWS: State Democrats continue push for new capital gains income tax, as latest economic forecast projects a $3.2 billion increase in tax collections
More than 4,000 people signed in for Monday’s public hearing by the House Finance Committee on SB 5096, the capital gains income tax bill that was passed in the Senate by a 25-24 vote last week. Some 2,800 people said they favor the measure, but opponents submitted a petition with nearly 13,700 signatures, in addition to those that had signed-in at the hearing in opposition to the measure.
Proponents urged passage of the bill to meet what they said is a need for more money for child care, early learning, and other programs. They also said the bill is needed as a first step toward changing what they say is Washington’s regressive tax structure
Opponents pointed out that the proposed tax would likely violate Washington state’s constitutional prohibition against income taxes. They also cited the volatility of capital gains taxes that make them unreliable for funding important public services. Republican Congressman Dan Newhouse, who represents the Yakima/Tri-Cities area, was among those who expressed opposition to the bill. He cited an official response to his inquiry about the treatment of capital gains by the IRS which said that "capital gains are treated as income under the tax code, and taxed as such."
After Monday’s House Finance Committee Hearing on the proposed new income tax, the state Economic and Revenue Forecast Council released its latest report on Wednesday, projecting an estimated $3.2 billion in additional tax collections by the state through 2023. This includes a $1.3 billion increase for the current 2019-21 budget cycle and an additional $1.9 billion increase for the 2021-23 budget cycle.
This money is in addition to another $4.2 billion the state will receive in federal COVID aid passed by the U.S. Congress last week.
According to the forecast council’s director, these projections put Washington back to the economic growth expected before the pandemic hit. In fact, it is a significant turnaround from last spring when the council projected a $9 billion shortfall as the economy shut down after COVID-19-related restrictions imposed by the governor.
The current two-year state budget amounts to more than $53 billion in spending for various state programs. Governor Inslee’s plan for the 2021-23 two-year budget cycle proposes $57.6 billion, with increases in spending for state programs across the board.
The governor’s proposal was released in December, and state House and Senate budget writers will finalize their proposals in the coming weeks, as this year’s 105-day legislative session—now in its 66th day, moves closer to its scheduled end on April 25, 2021.
Both the governor and legislative Democrats have continued to push for new taxes, including the capital gains income tax, to fund proposed spending increases. Minority House and Senate Republicans released budget proposals of their own earlier this session with no increased taxes. The proposals came before the billions of dollars in new federal COVID aid and projected revenue increases.
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