Democrats revise their capital gains tax idea

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Reuven Carlyle

Plan B for a Washington capital gains tax got the same reception Wednesday as Plan A did earlier.

Teachers, school interests, universities, labor and social service interests love the idea. Business and real estate interests and anti-tax initiative promoter Tim Eyman hate the concept

A capital gains tax is a plank in the Democratic-controlled House's plans for the 2015-2017 budget, which includes raising additional revenue to improve education. The Republican-controlled Senate says the education money is already available, and opposes any new taxes.

The House Finance Committee held a hearing Wednesday on a revision of a dormant capital gains tax bill introduced three months ago by Rep. Laurie Jinkins, D-Tacoma.

This Plan B is almost a clone of the earlier measure. The introduction of the modestly revised bill is meant to give the House Democrats flexible options to present to Senate Republicans in the super-slow budget talks between the two sides, said committee chair Rep. Reuven Carlyle, D-Seattle.

Jinkins' revised bill calls for a 5 percent capital gains tax with exemptions for sales of primary residences and timberlands. Selling a business would not be exempt. Also, single people making less than $25,000 a year in capital gains revenue and a couple making less than $50,000 annually from capital gains profits would be exempt.

It is estimated that 32,000 people would be affected by the tax. The tax would raise an estimated $570 million in 2015-2017 and an estimated $1.27 billion in 2017-2019, according to finance committee staff figures.

At the hearing, supporters pointed to the benefits of additional money flowing to education, while preserving social services budgets. With 41 other states having capital gains taxes -- most with rates higher than 5 percent -- there is little incentive for wealthy people to flee the state, they said. Also, the $50,000 exemption for a couple would be the highest in the nation, Carlyle said.

"This is the first time that the safety net is not being shredded for other programs -- at least in the House budget. But we won't see that result without additional revenue. Personally, this is a tax that I'd aspire to pay," said Bob Cooper a social services lobbyist. “I’m not there yet.”

Opponents argued small business owners would lose retirement money when they sell their businesses after 20 to 40 years of work without pensions. Also, money from sales of non-primary residence would be taxed, they said. And they contended a capital gains tax is similar to an income tax, which Washingtonians have opposed

"Small business owners are not the wealthiest Washingtonians, and don't feel they are," said Gary Smith of the Independent Business Association of Washington State. For them, he added, "This is effectively retirement in reverse."


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John Stang

John Stang

John Stang is a freelance writer who often covers state government and the environment. He can be reached on email at and on Twitter at @johnstang_8