Understanding Washington’s New Tax on Capital Gains

By Angee Pogosian, Washington Bus Legislative Intern

Senate Bill 5096, which concerns a tax on capital gains, has been signed into law. I know what you’re thinking, “another tax?” Let me tell you, I’ve got a cracked windshield, a constant burden of not knowing how I’ll pay for college, and a friend who just Venmo requested me $5 for coffee. If any of this resonates with you slightly then rest assured this tax does not impact you financially; in fact it benefits the vast majority of Washingtonians. Before we get into how this can be, let’s go over the bill.

Senate Bill 5096 will impose a 7% tax on excessive capital gains of $250,000 or more. Capital gains are the profits made on the sale of investments such as stocks, bonds, and real estate. For example, say someone bought 150 shares of Amazon stock prior to the pandemic for $270,000 ($1,800 per share). During the pandemic the value per share went up to $3,500. If that person were to sell all their shares of Amazon, they would have a profit (capital gain) of $255,000. Who is able to spare $270,000 to invest to begin with? Not me, and probably not you. Only the wealthiest Washingtonians are able to afford large investments, giving them the opportunity to become richer during a global pandemic. Meanwhile working families across the state struggle to afford basic needs like housing and childcare. We must invest into our communities; we can do so when the rich pay their fair share.

Yes, this tax is fair. Washington State has the most upside down tax code in the nation. Working people pay proportionally more in income tax than their wealthiest counterparts. Gaining upward mobility and building wealth is increasingly challenging for poor people. Financial literacy is generally not taught in our public education system for working to middle class families to benefit from. Wealth is reproduced generationally from knowledge and resources that are passed down. Investing is a privilege which is becoming one of the few ways that wealth can be accumulated at all.

The revenues made from this tax would fund the Washington State Education Trust, childcare, and the Working Families Tax Exemption. When families are able to access quality education, childcare, and their basic needs, they are more likely to progress socio-economically for themselves and their posterity. Investing in our low and middle income communities benefits everyone, as families will have more money to circulate into the local economy and stabilize their lives. We appreciate Representative Frame for sponsoring this bill, and all the young people who worked hard to get it passed.

What we WON in the 2021 Leg Session 🎊

This post was written by Bus Staff

The  legislative session is over for this year, and we’re here reflecting on what we WON, and on the work that still needs to be done. First off, we’re proud of all the young people who called their legislators, showed up to testify, and advocated for policies they believe in. Our legislative system is tricky – it’s hard to understand, and it can really seem like a black box, one which has the potential to create transformative justice on so many issues, but often falls short of the values we believe in. We watched legislators make racist, hurtful statements on the floor and in committee. We also saw young people standing up for what they believe in, by waiting hours to testify remotely for Community College equity, or the Working Families Tax Credit. 

We have to celebrate the small wins, because even small wins are big wins. Check out some of what we won below. 

What we Won

😇  We restored Voting Rights to 26,000 of our neighbors in WA 

HB 1078 increases voting access by automatically restoring the right to vote to those no longer in community custody. Say thank you to Rep. Tarra Simmons.

📚 We invested in our Community and Technical Colleges

The Our Colleges our Future Act invests $33 million into our Community and Technical Colleges to add 200 new full-time faculty positions, increase mental health counseling, and add advisers. The bill also implements diversity, equity and inclusion plans and changes residency requirements so more undocumented students can qualify for in-state financial aid. Say thank you to Senator Marko Liias.

💸  We put $$ in the pockets of young people and working families 

The Working Families Tax credit will  provide a much needed income boost of up to $950 for nearly one million working Washingtonians. This tax refund will help support an equitable recovery for working families, college students, immigrants, and young folks without children. Say thank you to Rep. My-Linh Thai.

🤑  We taxed the rich and took a step towards a more just tax code

Capital Gains is a big deal. We made a HUGE step towards fixing Washington’s upside down tax code by passing a tax on extraordinary profits from the sale of stocks and bonds. This will only impact Washington’s wealthiest individuals and will help fund a just recovery that includes funding for childcare, early learning, and K-12. Say thank you to Rep. Noel Frame and Senator June Robinson.

We cut down transportation emissions and pollution

The Clean Fuels Standard makes a big impact on carbon emissions from the transportation sector, and is a common sense way to reduce carbon emissions and fight climate change. We’ve now joined Oregon and California in implementing this policy. Say thank you to Rep. Joe Fitzgibbon.

 🚔  We took a step towards de-militarizing police

A coalition of first term Black legislators successfully pushed police accountability measure HB 1054. This bill bans no-knock warrants and chokeholds, restricts the use of tear gas, and limits other tactics often used in police brutality cases. Say thank you to Rep. Jesse Johnson.

🗝  We banned for-profit private prisons

What!! After years of activism and hard work from advocates, the Washington State Legislature approved a ban on private, for-profit prisons. This means the Northwest Detention Center, the private immigrant detention center in Tacoma, WA, will be closed by 2025. We want to thank community leaders in the advocacy space, like La Resistencia, who have fought for this for years.

Where we Fell Short 

 😕  Making democracy more accessible 

Local Options for Ranked Choice Voting didn’t make it through. This bill would have given local jurisdictions the option to implement ranked choice voting, which is proven to make first time candidates, candidates of color, and woman candidates, more likely to run and win. We’re hoping to see this make it through the legislature another year. Stay tuned for ways to get involved!

Additionally, advisory votes will still show up on your ballot. Boooooooo. 

 😕  Police accountability to community

HB 1203 would have implemented Community Oversight Boards to hold police departments accountable across the state. The importance of this policy cannot be overstated – currently, police are held accountable only to their own departments. 

What’s next?? 💫

⏱ We’re looking forward to next year. The “interim” is where the magic happens – when legislators meet with constituents (that’s you!) and organizations like ours start to mobilize around policies that will make a difference to Washingtonians. Have a policy idea you think the Bus should work on?