The state’s March 2023 revenue forecast assumes that capital gains tax revenues will total $248.0 million in fiscal year 2023 (which ends on June 30). All of that would go to the education legacy trust account (ELTA). By statute, the first $500 million (adjusted for inflation annually) in collections goes to the ELTA (which is a fund subject to the outlook, or NGFO) and anything more than that goes to the common school construction account (CSCA).

According to the Department of Revenue (DOR), the state has so far (through May 9) received $849.2 million from the capital gains tax (related to gains realized in calendar year 2022). Taxpayers were required to file by April 18, but they could request an extension. So, although estimated payments were due April 18, the final amount collected will be adjusted for any over- or under-payments. That said, given current collections, it looks like the revenues to the ELTA for FY 2023 will increase by $252 million over the forecast and the CSCA will receive $349 million.

As the chart shows, collections in the ballpark of $849 million would be higher than anticipated in any year of the forecast. The estimate for 2023 is so much lower than in future years because the state assumed that taxpayers would shift their realizations of capital gains from 2022 to 2021 (to the extent possible). Was the shift lower than expected because it wasn’t clear if the tax would be constitutional? Is the low point just much higher than expected? As this is a new tax for Washington (and a volatile one in general), the state should be cautious about assuming that the higher-than-anticipated collections will continue apace. It will be interesting to see how the Economic and Revenue Forecast Council adjusts its forecast of capital gains revenues going forward.