A bill that would make Washington State’s upside down tax code more just and equitable by levying a capital gains tax on the wealthy has just been reported out of the House Finance Committee with a “do pass” recommendation.
SHB 2967, prime sponsored by Committee Chair Representative Kris Lytton (D-40th District: Bellingham, San Juan Islands, Whatcom and Skagit counties) would impose a seven percent tax on long-term capital gains. Retirement accounts, residential dwellings, family farms, and timberland would be exempt from the tax. Consequently, only about 48,000 of the state’s wealthiest taxpayers would pay it.
A substantial chunk of the revenue from the proposed capital gains tax would be paid by just two individuals: Bill Gates and Jeff Bezos, who are among the world’s richest men. Gates’ father William Gates, Sr. is an ardent proponent of progressive tax reform; he has long urged state legislators to make the tax code fairer.
Currently, low income families pay as much as 17% of their income in state and local taxes, while wealthy families pay less than 3% of their income in taxes.
Legislators have known about this disturbing disparity for years, but haven’t done anything about it. But this session, by introducing SHB 2967, House Democrats have signaled that they want to change that sad state of affairs.
Revenue from the capital gains tax would be used to reduce the property tax increase for K-12 public schools approved last year at the insistence of the Senate Republicans. The capital gains tax proposed in the bill thus represents a much-needed new funding source for public education that is based on ability to pay.
All six Democratic members of the Finance Committee (Kris Lytton, Noel Frame, Larry Springer, Laurie Dolan, Gerry Pollet, and Sharon Wylie) voted in favor of the bill. The committee’s five Republican members (Terry Nealey, Ed Orcutt, J.T. Wilcox, Cary Condotta, Drew Stokesbary) all voted nay.
NPI testified in favor of SHB 2967 last Friday, noting that 57% of Washingtonians surveyed last June support a capital gains tax. 44% of the total surveyed said they strongly supported a capital gains tax, while only 41% said they were opposed.
NPI has been asking Washingtonians about their support for a capital gains tax on the wealthy for three consecutive years and has found a majority of respondents in support each year, with strong support of 43% or 44% every year.