Building an Economy that Works for Everyone

Victory! Washington Takes a Critical Step Towards Balancing our Tax Code

Washington state supreme court upholds the capital gains tax

Families and advocates around the state are celebrating a major win for tax justice today. In a historic judgment, the Washington state supreme court has upheld the capital gains tax, ruling in a 7-2 decision that the tax is an excise tax and, therefore, constitutional. The court’s decision is a critical step toward balancing our upside-down tax code and ensuring the wealthiest in our state finally begin to pay what they owe.

The capital gains tax, passed in 2021, is a 7% tax on the sale of assets like stocks and bonds when the profits (capital gains) from such sales exceed $250,000 in a year. Only the top 0.2% wealthiest Washingtonians will pay the tax.

The state will begin collecting the capital gains tax – which generates $500 million annually – this year. The revenue is earmarked for investments in early learning and basic education and will help ensure child care providers make a living wage, public school students receive a quality education, and school districts can afford critical facility repairs to keep kids safe. The planned investments will also provide families in Washington with a much-needed economic boost at a time when so many are struggling to stay afloat amid a rising cost of living.

“The most progressive change in Washington tax policy in generations”

In addition to upholding the tax, the state Supreme Court recognized the upside-down nature of our revenue system, stating that our tax code “has earned the regrettable title of most regressive in the nation”. In their opinion, the Justices explicitly name the racist impacts of Washington’s tax code:

“The wealthiest households in Washington are disproportionately white, while the poorest households are disproportionately BIPOC. As a result, Washington’s upside-down tax system perpetuates systemic racism by placing a disproportionate tax burden on BIPOC residents”.

By formally recognizing the inherent inequity of our tax system, the Supreme Court affirmed what communities and advocates have been saying for decades – it’s long past time we implement a tax code that works for working people in our state, not just the wealthy few.

The fight for tax justice continues

While this decision is a huge win for families, it is just one step in the direction of a balanced tax code that is equitable and stable for future generations. We must go further and pass bold policies like a wealth tax if we want to fully fund the critical services our communities need and lessen our reliance on regressive taxes.

As our Legislature faces ongoing pressure to either cut services or maintain an inadequate status quo, it’s critical that our lawmakers consider other common-sense solutions before them. Progressive revenue policies like the capital gains tax and the proposed wealth tax are not only popular with voters, but they provide the necessary revenue to meet the needs of our communities. Instead of balancing the budget on the backs of working people, we can and should demand that the wealthy pay their share with a wealth tax. When we invest together, we can make Washington a great place to live for all of us.

To stay up to date on our priority bills and learn more about the progressive revenue policies we’re advancing this legislative session, visit our 2023 legislative agenda.

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