Advisory vote 37: WA voters will opine on the state's new capital gains tax

Oct 26, 2021

Washington's new capital gains tax is the subject of an advisory vote during this general election.
Credit Courtesy of Washington Secretary of State

On Election Day Washington voters will have the chance to share their opinions about a controversial new state capital gains tax (Advisory Vote 37).

The tax has been framed two ways, as a way to level the playing field and compel the wealthy to pay their fair share, and as a way around the state constitutions’s near ban on collecting income taxes.

Voters will weigh in on the tax through an advisory vote. But whether they mark repeal or sustain, it won’t change whether the tax is collected.

An initiative sponsored by anti-tax activist Tim Eyman 10 years ago requires the state to allow voters to provide opinions on new taxes. But the votes are only advisory. Some legislators, such as Olympia Democrat Sam Hunt, say advisory vote language is so loaded that state government can’t take it seriously.

“It’s just so incomplete or so slanted,” he said. “Whether it’s good or bad, you can’t figure it out from the advisory language.”

Hunt is a sponsor of the capital gains tax and of a bill to reform the advisory vote process. He says the vast majority of people who vote on the capital gains advisory will never pay the tax.

“It will probably never affect about 90% of the people in the state of Washington because it’s a tax on capital gains and there a number of provisions in there that target it just at the high earners,” he said.

The most common transactions taxed are the sale of stocks and bonds. The first $250,000 in capital gains will not be taxed.

The tax includes several large exemptions, including livestock, real estate and assets in retirement accounts. Family-owned and operated businesses can also receive deductions.

According to the new law, revenue generated by the capital gains tax will go toward early learning, child care programs and school construction.

Opponents of the tax, such as the Washington Policy Center, a right-leaning think tank, and business groups, argue it will discourage businesses from coming to Washington and discourage startups.

The state is engaged in a legal battle with the Freedom Foundation and the Washington Farm Bureau over whether Washington can legally impose the tax.