Opponents of repealing capital gains tax highlight its role funding schools and child care

By Grace Deng

As back-to-school season starts, opponents of a ballot initiative to repeal Washington’s capital gains tax are highlighting how losing the money could undermine school construction and child care programs. 

“Our youth are struggling,” said state Rep. Tina Orwall, D-Des Moines, who sponsored one of many proposals to tax wealthy individuals in 2021, the year lawmakers passed the capital gains tax. “We need to use every tool we can to support them.” 

Initiative 2109, which will appear on voters’ ballots in November, would repeal the 7% tax on realized capital gains over $262,000 (adjusted for inflation annually, which means the threshold likely increases with each tax year). Those gains usually come from the sale of investments like stocks, bonds or business interests. The tax does not apply to real estate sales. 

In 2023, the tax brought in about $786 million. The state collected another $433 million from it as of May of this year.

Estimates show eliminating the tax would drain a total of $2.2 billion over five state fiscal years, according to a fiscal impact statement prepared by the Office of Financial Management. However, capital gains taxes are a volatile source of revenue, which makes future revenue from the tax difficult to accurately predict. 

Money from the capital gains tax has gone to fund 171 school construction projects across the state during the 2023-25 fiscal year, according to the Washington State Budget & Policy Center. “Almost one in each county,” Orwall said. The Office of Financial Management figures show the tax would not generate more than $500 million in any of the next five fiscal years, keeping it below a threshold where money gets deposited in an account that goes toward school construction. 

Read the full article in the Washington State Standard.