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Progressive tax reform campaign continues as Legislature hears estate and capital gains proposals

With hearings scheduled this week for two bills introduced by legislative Democrats that would change Washington’s tax structure, advocates are continuing a public campaign to push legislators in the direction of embracing progressive revenue.

Following an earlier campaign that ran ads in support of Gov. Inslee’s capital gains tax and a tax on health insurers, Invest in WA Now has released a new ad centered around small business owners.

It’s important to keep things moving. Like how money flowing through communities creates a strong economy. But now money is stuck at the top. Because Washington has the country’s most upside-down tax code where the wealthy pay less than the rest of us. If the wealthy pay their share, we’ll have an economic recovery that works for all of us. Money flowing through our community keeps people working and lets us invest in schools and business. That means more jobs and more business,” says the ad. 

Invest in WA Now, which describes itself as “a movement of educators, working families, and everyday Washingtonians advocating for progressive revenue solutions,” says the ad will run in key legislative districts.

With no income tax and a heavy reliance on revenue sources that place more of a burden on low income households than wealthy households, Washington’s tax structure has been found to be the most regressive in the country.

According to a 2018 report, about 60 percent of the state’s tax base comes from sales and excise taxes. These revenue sources are considered regressive because people pay the same tax, regardless of income level. The report also found that the state’s wealthiest households spend about 3 percent of their income on taxes, whereas the poorest families spend 17.8 percent. This disparity is the largest of any state.

Reforming the tax structure has long been a priority for many Democrats. House Speaker Laurie Jinkins noted this week that she first introduced a capital gains tax eight years ago. The support for a capital gains tax is strong, but not unanimous among legislative Democrats.

One proposal targets new revenue through changes to large estate taxes and the other would tax capital gains above a certain threshold.

For Rep. Tina Orwall’s (D – Des Moines) estate tax proposal, the exclusion amount would be increased to $2.5 million and the rates for estates over $3 million through $9 million would be increased. Additional rate classes would also be created for estates over $9 million.

Ten percent of the revenue would be transferred into a new Equity in Housing Account, which would be used to address homelessness.

The capital gains tax was introduced by Rep. Tana Senn (D – Mercer Island). Senn’s legislation would exempt the first $200,000 in profit for single taxpayers and $400,000 for joint filers. Capital gains above those thresholds would be subject to a 7% tax rate on the sale of real property and a 9.9% rate on the sale of corporate stocks, bonds, and other high-end financial assets.

Proponents say the new taxes would raise billions in revenue for public health, early learning, and small business assistance. Aside from where the revenues would go, some legislative Democrats say the proposals are ultimately about fairness.

I’m very supportive of us looking at taxes and revenue that changes our completely upside down tax structure,” said Speaker Jinkins. “I think a lot of people focus on the money side of this. But we have the most regressive structure in the United States, the most unfair structure in the United States and either the wealth or capital gains tax has the chance to help us start reforming our tax structure and making it fair so that we’re not building every piece of this state on the backs of the poorest Washingtonians.”

The wealth tax to which Jinkins referred is a proposal from Rep. Noel Frame (D- Seattle) that would assess a one percent tax on financial intangible assets, with the first $1 billion exempt.

In an interview with Geek Wire this week, one of Seattle’s newest billionaires, Tanium CEO Orion Hindawi, said that Gov. Inslee’s embrace of a capital gains tax is “becoming a huge PR issue for Washington state.”

Hindawi, who moved to Seattle from the San Francisco Bay Area a few months ago, said that other CEOs would view these sorts of taxes as “vilification.”

Washington is one of nine states that do not impose a state income tax.

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