OLYMPIA –Today, Rep. Tana Senn (D-Mercer Island) introduced House Bill 1496 to bolster economic recovery and economic well-being of working families by funding the expansion and affordability of child care through a capital gains tax. Senn’s proposal targets assets that are regularly sold by the ultra-wealthy and includes several exemptions to avoid taxing working families, helping to rebalance Washington’s regressive tax code.
“The pandemic highlighted the critical importance of child care for working families and the business community. It’s imperative we invest in child care for immediate and long-term economic recovery,” explained Senn. “With enactment of this capital gains tax, we’ll help kids across our state get a fair start and ensure the wealthiest share in the responsibility of funding this key community investment.”
Washington State has the most regressive tax code in the nation. As a percentage of household income, low-income families pay nearly 18% in taxes, middle-income families pay 11%, and the state’s highest income households pay 3% or less. That means working families are funding a disproportionate share of schools, public health, public safety, and other vital government functions while the wealthy pay proportionately less.
Capital gains is an excise tax on profits from the sale of certain assets, including stocks and bonds, expensive art, large profitable businesses, and other high-valued assets. The legislation exempts the first $200,000 in profit for single taxpayers and $400,000 for joint filers. Capital gains above those thresholds would be subject to a 7% tax rate on the sale of real property and a 9.9% rate on the sale of corporate stocks, bonds, and other high-end financial assets.
Senn’s proposal includes several exemptions to avoid taxing working families. Those exemptions include primary residences sold for $5 million or less; retirement accounts, including IRA and 401K retirement plans; livestock; and the sale of agricultural land and timber. Qualifying family-owned businesses grossing under $10 million annually are also exempt. The capital gains tax proposal also includes a credit for taxes paid through the Real Estate Excise Tax.
With these exemptions, the capital gains tax would be paid almost exclusively by the wealthiest 1% of households.
“To kickstart our economy, provide resources to invest back into our communities and rebalance our upside-down tax code, let’s pass this common-sense tax on extraordinary profits,” Senn said.
House Bill 1496 is expected to be referred to the House Finance Committee for a hearing.