That the court will have a chance to decide the case is far from a sure thing.
The Senate vote was a first step, a big one to be sure. It's likely the House will follow suit soon; majority support there seems certain. And, as he included a capital gains tax in his budget, the governor will no doubt sign the legislation when it gets it.
Then two things are likely to occur: A lawsuit and a referendum. If the voters veto the tax, the lawsuit is history.
"The measure would impose a 7% tax on the sale of stocks, bonds and other high-end assets — like a classic car or painting — in excess of $250,000 for both individuals and couples. A person whose business makes more than $10 million per year is also subject to the tax if they make more than $250,000 in selling the business.
"Retirement accounts, real estate, farms and forestry would be exempt from the proposed tax. Staff for Senate Democrats say that between 16,000 and 18,000 people in the state could be subject to the tax, based on data from the state Department of Revenue."
Again, with respect to any new tax, the details matter less than the precedent. Statutory language is easily changed, thresholds can be raised and lowered and rates and bases adjusted, depending on the preferences of a legislative majority.
So there's no shortage in revenues, certainly not when it comes to meeting current budget obligations. But, as the Senate Majority Leader told
the Spokesman-Review,
"Spokane Democrat Andy Billig told reporters two weeks ago that it isn’t realistic to say the state’s budget is balanced and then want to fund large programs, such as the Working Families Tax Credit or child care, without new revenue."
The argument that the money is necessary would be more compelling, perhaps, if the proposed spending were better defined. Urging lawmakers to "slow way down" on the capital gains tax, the
Seattle Times editorial board writes,
"Senate Bill 5096 offers no specific use for the estimated $550 million money it would raise each year. Its vague promises to steer some money toward education and other funds toward undefined “taxpayer relief” are not clear justifications for levying new taxes...
"If taxation treats people with lower incomes unfairly, shifting the burden could be a solution. Simply adding to one side of the scale is not."
State
revenues and spending have grown rapidly since the Great Recession. Even before the pandemic, the sustainability of the budget was questionable. "New revenue" in the form of a highly volatile capital gains tax unnecessarily increases fiscal risk.
"When the Senate narrowly approved a capital gains tax on Saturday, they all but invited two challenges to the measure, should it become law: A legal argument that it violates the constitution and a referendum to force a statewide vote in November."
The referendum is possible because the Senate stripped the emergency clause from the proposed legislation. As our recent survey found, Washington voters oppose the new tax (chart below). They may yet have a chance to be heard on the question.
