Sixth Year, Austin Jenkins, Jason discussed on Seattle Now
For six years in a row now. Democrats in olympia have tried to pass a tax on capital gains this year. It looks like it might actually happen. Washington may be headed for a more progressive tax system. Austin jenkins has been following the tax. As it makes its way through the legislature. He's the northwest news. Networks olympia correspondent. Hey austin hello. How are you good. Thanks for doing this. Capital gains tax gets thrown around a lot and it just sales right by people's heads so gives the basics what exactly is a capital gains tax. That might be because most people don't pay the capital gains tax right so a capital gains taxes. The tax on profit realized from the sale of non inventory assets essentially. You've bought something you've watched the value. Go up it's an investment and then you sell it for a gain is the tax you pay in the sale of stocks and bonds mutual funds from real estate sales under the current version and the legislature. It's a seven percent tax and capital gains over two hundred and fifty thousand dollars. So someone's i two hundred fifty thousand dollars. In capital gains would be tax free and then the tax would kick in after that. Okay let's go through some of the specifics who's going to pay this tax so under the version of the bill. That's moving right now. Here in olympia. The sponsor says it would be paid by just two percent of the state's wealthiest residents it. Looks like about eight thousand taxpayers in washington so it really does hit a pretty small university of people. And that's one of the selling points for democrats say. This is a tax on wealthy people. Not in everyday people right. Okay so you and me not paying this tax and it actually targets a very very small percentage of the population. What about exceptions. There are several exemptions to this bill including all real estate and retirement account assets lands that meet certain requirements would be exempt as well as timber and timberlands. There's also a deduction for family owned businesses that gross less than six million dollars a year as this bill has moved through the process. It's gotten narrower and narrower not broader and broader okay if it goes through as it's written how much money would it raise. I'm gonna say this with the caveat that what you will often hear about the capital gains taxes. It's quite volatile and it changes from year to year but the working assumption is that by twenty twenty five might be bringing in around half a billion dollars a year. Five hundred million dollars a year so it's not a ton of money for the state to work with. Yeah but that's not chump change. Where would that go austin. So as written now the bill would dedicate the first three hundred and fifty million dollars each year. That came from this to the states. Education legacy trust account which is generally a bucket that supports public schools but that can also include childcare and early learning which is something that majority democrats are talking a lot about and saying that needs to be a priority. i'm and then the remainder would be deposited into a new tax payer relief account which is sort of this amorphous thing. We're not really sure what it is or how it would work. But you can tell by the title that the idea is that somehow they'd be thinking about using some of the proceeds to offset taxes in other places. Oh maybe for instance by funding the earned income tax credit for lower income families or reducing taxes. Elsewhere all right. I'm hearing a couple of things that people are talking about. Education being one of them traditionally. This has been a pretty tough sell in washington state. Where is the pushback coming from right now. Well a lot of pushback from republicans who say this is essentially the camel's nose under the tent. That maybe it's only eight thousand taxpayers twenty twenty three but maybe it gets expanded in future years and we're all paying it so tax creep tax creep exactly then you're also hearing this idea that it's an income tax not an excise tax and therefore is unconstitutional. And by the way if this passes it is almost certain to face a court test. So they're saying it's unconstitutional. It's an income tax and it's coming for you everyday taxpayer okay. That is the pushback in reality. This is getting some traction right now. So what's different. It's the sixth year in a row. That democrats have tried to get this capital gains tax through. It is failed every time. Why is now the right time. There's a couple of things going on. One is sort of a rob politics thing. Which is that. This has generally been promoted in the washington house but it hasn't had the votes to pass in the state. Senate that appears to have changed with a couple of change outs in the makeup of the senate democratic caucus after last year's election so they now may in fact have the twenty five votes. They need to pass this. Whereas before they didn't the other thing that is clearly happening is that democrats are really leaning into this idea of tax fairness because of the pandemic and they're saying that the pandemic has revealed disparities and inequities that were already there and in essence. They don't wanna waste this crisis to from their perspective invest in things like childcare for the future to really be looking to the future as opposed to just dealing with the immediate crisis balancing the budget. So they're very much looking at this. Tax is a way to fund future priorities and to address. What they have long said is an upside down tax structure in the state. This is something. I hear a lot about how regressive our tax code is. What does that really mean it again for the guy in the back. Well what it means. Is that the lowest income. Washingtonians are paying nearly twenty percent of their earnings in taxes. While the top one percent pay like three percent of their earnings taxes. So that's what democrats mean when they say upside-down that that the burden of our tax is disproportionately on those lower income. Earners and democrats say essentially rich people when it comes to state taxes are kinda skating free. It's expensive to be poor. I hear that expression a lot. What would it mean if this passes it. Seems like it's a big deal. In addition to the money it would be a really big deal. Partly because you note it's been percolating for several years or marinating. This is a new tax. This isn't just raising existing tax or playing around with the knobs on the current taxes. We have this is actually establishing a brand new tax that exists at the federal level to be clear in many states but not in washington. I think also just philosophically would really represent a win for advocates on the left who have been pushing for so long to do this and to focus on trying to tax wealthier washingtonians. They've wanted this. And so this goes through. This becomes a major major victory for them. What's next austin. What should we be looking for. We should be looking to see if the state senate brings the capital gains tax to the floor for a vote in the coming days. If that happens that is going to be significant. It will tell you that this has momentum and legs and like it's really going to happen if it doesn't come to a vote pretty quickly in languishes. Then we're going to kind of have to wait and see it may signal that it's losing support it may also signals democrats. Just kinda wanna see what happens with march revenue forecast and if they can sell the idea even if the state is kind of flush with cash when all of a sudden all right austin we will stay in touch k. u. a. Olympia correspondent austin jenkins. Thanks a lot you're welcome. Thanks for having me. Seattle now is produced by clermont mcgrane caroline chamberlain gomez and jason began matt. Jorgensen does our music. I'm patricia murphy.