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Latest capital gains tax plan is still an income tax

  • 1 min to read

A disingenuous proposal to impose an income tax — cloaked as a financial transaction tax — in Washington state is gaining momentum in the Senate.

Last week, the Senate Ways and Means Committee forwarded a 7% capital gains tax to the Rules Committee, which serves as the launching pad for legislation to a full Senate vote.

As this tax proposal by Sen. June Robinson, D-Everett, progresses through the Senate, its supporters continue to insist that a capital gains tax is not an income tax. They seem to be trying to fool the public, and perhaps themselves.

The U.S. Internal Revenue Service wouldn’t accept that reasoning (or lack of reasoning) from any American whose tax returns were audited.

The federal government considers money gained through the sale of a capital asset — such as stocks and bonds — as taxable income.

How is the capital gains tax being seriously considered in the state Senate any different?

It isn’t. Although the Democrats who control the Senate (as well as the House and governor’s mansion) eagerly point to analysis that shows this tax would only affect the top 2% of earners in the state. In short, it’s only the super rich who will pay it.

That, however, does not change the fact that this is an income tax, which is prohibited by the state Constitution.

The only way to legally impose an income tax is to change the state Constitution. Washington voters have so far rejected the concept 10 times.

An 11th time attempt would have worse odds of success than a bet on the Mariners winning the World Series this year.

And that’s why lawmakers are hoping political arguments will win in the day. Legislators are making it an us-vs.-them issue.

Originally, Gov. Jay Inslee proposed a 9% tax on capital gains on earnings above $25,000 for individuals or $50,000 for joint filers. At that level, many more Washingtonians would have had to pay it.

The proposal has now been amended to a 7% tax on the sale of stocks and bonds, personal property and businesses, but only if those profits exceed $250,000 annually.

Again, while that’s just political pandering, it doesn’t change the fact it is still an income tax, and it’s still unconstitutional.

If the Democratic majority truly believes an income tax (including taxing capital gains specifically) is necessary and would be embraced by the people, then have an honest debate on taxing income and attempt to change the state Constitution.