In March, a Superior Court judge ruled that the state capital gains tax is unconstitutional. (Despite that, the Legislature chose to include capital gains revenues in the operating budget, as we explained here.)

The state Supreme Court will hear the case on Jan. 26, but a decision could come after capital gains taxes are due for 2022 (in April 2023). In the meantime, the Supreme Court has stayed the Superior Court order. According to Lane Powell, this means that “the State may begin administering the tax and taxpayers will be forced to pay the capital tax gains with their federal income tax filings in 2023.”

The November revenue forecast for funds subject to the outlook (NGFO) includes capital gains tax revenues. The capital gains tax is estimated to increase NGFO revenues by $243.0 million in 2021–23, $945.0 million in 2023–25, and $1.064 billion in 2025–27. (Outside of the NGFO, the capital gains tax is estimated to increase revenues for the school construction account by $202.0 million in 2023–25 and by $529.0 million in 2025–27.) As the chart shows, estimated capital gains tax revenues are a small portion of overall NGFO revenues.