Voters decide to keep capital gains tax

Tuesday night results for Initiative 2109 show the measure to repeal the capital gains tax is failing by a wide enough margin for backers of the measure to declare defeat.

As of Tuesday night, 63.2% of returned ballots voted against the measure, and 36.8% voted in favor. 

"This one is ugly," said Brian Heywood of Let's Go Washington during a Tuesday night election event in Kirkland. 

I-2109 was one of four initiatives on the Nov. 5 ballot backed by Heywood's organization. 

"Apparently a lot of people want to pay an income tax," said Heywood in gest as the crowd of supporters booed. 

Supporters of repealing the capital gains tax warned that it was a stepping stone to subverting Washington's ban on income taxes. 

The capital gains tax levies a 7% tax on the sale or exchange of long-term capital assets.

The tax was created by the passage of Senate Bill 5096 in 2021,. despite a great deal of opposition from business and retail advocates, based on concerns about the volatility of the tax and the potential for wealthy Washingtonians to move out of state.

Most notably, billionaire Amazon founder Jeff Bezos stopped selling stock once the tax took effect only to resume selling shares once he established residency in Florida. 

Treasure Mackley, executive director of Invest in Washington Now, supported defeating I-2109.

“The first year it [capital gains tax] brought in $896 million which was over what was estimated," Mackley told The Center Square back in July. "That goes to show how much wealth we have here in Washington state." 

Rep. Chris Corry, R-Yakima, told The Center Square the capital gains tax is too volatile to rely upon for budgeting purposes.

“You should never prioritize core functions of government based on volatile taxes,” he explained, which he suggested is what's happening.

The No on 2109 campaign urged voters to reject the measure arguing its passage would eliminate billions of dollars of dedicated funding for K-12 education, higher education, school construction, early learning, and childcare.

Corry said that argument was all part of the plan.

“When they want new money, they tie it to emotional programs like police and fire and schools, because that strikes the most emotion,” he said. “You can fund all these programs without a capital gains tax; it’s just a matter of prioritizing."

Corry noted education priorities are a paramount duty of state government, but said money coming in via other taxes is sufficient.

The state constitution bans a state income tax except under rare conditions. Democrats circumvented this provision by labeling the capital gains tax an “excise” tax. The state Supreme Court eventually ruled the tax was constitutional.

In response, Let’s Go Washington collected more than 454,000 signatures from voters for I-2109 to go to the state Legislature. Democratic leaders in Olympia chose not to consider the measure, sending it directly to voters.

The No on 2109 campaign sent a news release via email that, in part, said, “Washingtonians have spoken loud and clear for progress toward fixing our upside-down tax code, as the middle class pay three times their income in taxes as the wealthiest Washingtonians. Thanks to the capital gains tax, we have gone from 50th to 49th most regressive tax code in the nation. Tonight voters said, let’s continue going forward, not back."