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Capital gains tax unlikely to pass in the Senate

This week, House and Senate Democrats released their supplemental budget proposals. Both budgets focused on funding education, supporting mental health services, and providing property tax relief. While many of the priorities were similar, there were a few key differences in the details.

One significant difference is the method by which the House plans to reduce property taxes. Similar to the Senate budget, the House proposed a short term fix by using extra tax revenue reported in the recently released revenue forecast to temporarily reduce property taxes in 2019 and 2020. The Senate’s proposed budget would provide temporary property tax relief in 2019 only. Then for 2021, the House has proposed a capital gains tax to offset decreased property taxes.

The capital gains tax would impose a 7 percent tax on long-term capital gains and would include certain exemptions such as assets in a retirement savings account or the sale of a residence.

Representative Kristine Lytton, discussed the capital gains tax during a media briefing on the House budget on Tuesday. When asked if she had a “plan b” in case the capital gains tax doesn’t pass the House, she said,

“No. We feel confident that we have the votes out of our chamber. We have in the past. We’ve passed capital gains that actually went to the general fund in the past. I think our caucus is very interested… So we plan on passing it out of the House.”

Though Rep. Lytton is confident the capital gains tax will pass in the House, Governor Inslee said in a press conference today that he has been advised that the votes do not currently exist to pass the tax in the Senate.

“My understanding is that it’s very unlikely that the votes could be there in the state Senate for that approach,” said Inslee.

This news is likely a relief for Republicans who have said that a capital gains tax is simply a stairway to an income tax.

“The facts are this – there is no state in the country, not one, that just has a capital gains income tax without an income tax,” said Rep. Dan Kristiansen on Tuesday.

“There’s enough tax revenue coming in right now to provide the tax relief that’s necessary,” added Representative J.T. Wilcox.

The two chambers will have until March 8, the last day of session, to come to a compromise and pass the supplemental budget. The House plans to bring the budget, as well as the capital gains tax, to the floor on Friday.

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