Here are some highlights:
- Both Gov. Inslee and the House Democratic Caucus have proposed capital gains taxes.
- Washington residents would have to pay tax on federally-defined gains.
- Nonresidents would pay capital gains on real estate located in the state, or on personal property when the sale takes place in the state.
- A major exemption would be gains from single-family residential real estate, regardless of whether it is owner occupied or a rental, a departure from past proposals.
- Some agricultural, forestry and other activities would also be exempt in both plans.
- Every state that currently taxes capital gains does so through its income tax.
- Framing the proposals as an excise tax may prevent a federal tax deduction.
- The governor’s plan calls for a rate of 7.9 percent, the House’s for 7 percent.
- Both proposals have exemptions of $25,000 for individuals and $50,000 for couples.
- Revenue projections for the governor’s capital gains tax proposal foresee $821 million new funds in 2019 and $1.848 billion in the 2019–21 biennium.
- The House’s plan assumes $715 million in revenues in the first year, but a fiscal note has not been issued.
- Tax revenues from capital gains fluctuate significantly with the state of the economy.
- The governor’s proposal includes a reserve fund to mitigate revenue volatility; the House Democratic Caucus’s proposal does not include a reserve fund.
- Capital gains tax exposure causes large investors to move assets or hold gains, both of which prevent investment in job-creating businesses.
- Investors in some fields will be exempt while others must pay, raising fairness issues.
- Start-up companies which rely on grants of stock or stock options to recruit employees will find the state less attractive.
- Several other tax proposals are on the table, raising the question of what the cumulative impact would be.
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