Judge Approves Challenge To Washington's Capital Gains Tax

OLYMPIA, WA — A movement to defeat Washington's new capital gains tax is gaining ground, after a Thurston County judge approved the wording of an initiative to repeal the tax.

Judge Indu Thom on Thursday gave the repeal campaign the green light to begin gathering signatures for Initiative 1929, the Everett Herald reported. Organizers now have until July to gather the signatures of 324,516 registered voters to get their initiative on the fall ballot.

Initiative 1929 asks voters to eliminate the tax outright. The tax in question was signed into law by Gov. Jay Inslee back in May of 2021. The bill sets forth a 7 percent tax on all capital gains — like the sales of stocks, bonds and other high-value assets — above $250,000 a year. It also provides several exceptions for gains like real estate and retirement accounts.

Experts estimate the tax would only impact roughly 7,000 of the richest Washington residents. At the bill's signing, the governor characterized it as an attempt to rebalance the state's upside-down tax structure, where lowest-income residents are often asked to do the heaviest lifting.

"This is a day where Washington state starts to make progress on making our upside-down tax system fairer and more equitable," Inslee said. "Today, we are taking steps to address this out-of-date system where working families pay a much higher percentage of their income than those who make a lot more."

According to the governor's office, low-income Washingtonians pay around 17 percent of their income in taxes, while middle class families pay around 11 percent and the state's wealthiest earners pay just 3 percent.

A lawsuit challenging the tax is also making its way through the courts.

While Initiative 1929 supporters will now begin collecting signatures to get their repeal on the ballot, a counter-effort has also sprung up. Invest in Washington Now, which describes itself as a coalition of educators, working families, and everyday Washingtonians advocating for progressive revenue solutions, is asking Washingtonians to "decline to sign" the initiative.

"Some of Washington’s super rich want to give themselves a huge tax cut, and make the rest of us pay," the movement's website says.

Invest in Washington Now has even set up a hotline to report Initiative 1929 signature gatherers.

“We are going to make it as expensive and uncomfortable for them as possible,” Invest in Washington Now spokeswoman Heather Weiner told the Everett Herald. “We will not interfere with them. We also want to make sure people have the facts.”

If the capital gains tax can clear its hurdles, the first payments would be due April 17, 2023.

Related stories:

Judge Blocks WA Capital Gains Tax, AG Plans To Appeal

Inslee Signs Capital Gains Tax, Working Families Tax Credit Bills