Washington voters to decide on capital gains tax repeal in November

SPOKANE, Wash. — This November voters will be asked to repeal or maintain the state’s current capital gains tax.

A “Yes” vote on Initiative 2109 would repeal Washington state’s capital gains tax, while a “No” vote would keep it in place.

This tax, also called Senate Bill 5096, was enacted in 2021 and imposes a 7% tax on sales and exchanges of long-term capital assets for individuals with capital gains exceeding $250,000.

Proponents of the repeal have called the SB 5096 a “backdoor income tax“, while opponents maintain it mainly affects ultra-wealthy individuals and that repealing it could shift more tax burdens onto average Washington residents.

In a recent campaign video, the Vote No on 2109 campaign stated, “It’ll cut billions from education and child care that so many families like mine rely on and can’t afford to lose, all because the super-wealthy don’t want to pay what they owe when they make huge profits on Wall Street. Ninety-nine point eight percent of us will never pay this tax.”

This ad is part of a campaign that asserts that 99.8% of Washingtonians do not pay this tax.

In 2023, the capital gains tax generated $433 million. This came from 3,850 returns. $371 million of that revenue has been deposited into the Education Legacy account.

If initiative 2109, the state is expected to lose more than $2 Billion in education and childcare.

Supporters of the repeal argue that a “Yes” vote would benefit all Washington residents.

The group “Let’s Go Washington,” which backs the initiative, claims the tax drives successful individuals out of the state, which could lead to changes in future tax requirements.

Washington is unique in having no income tax while imposing a capital gains tax. This is because an income tax is against the state constitution.

The state government has ruled that the capital gains tax is an excise tax, which is an indirect tax on specific services, goods, and activities.