Representative Laurie Jinkins (D-Tacoma) introduced HB 2563 today, which would impose a 5 percent excise tax on capital gains over $10,000 a year ($5,000 for an individual), a bill that borrows generously from proposals made by the Washington State Budget and Policy Center. The proposed bill would not tax profits from the sale of a primary residence or farmland, or affect retirement savings or inheritances. 97 percent of Washingtonians would see no tax increase at all. In fact, the richest one percent currently enjoy more than three-quarters of all capital gains (mostly the profit on the sale of stocks, bonds, and real estate).
One of the downsides to a capital gains tax is that it is extremely volatile, rising and falling with the economic cycle; it is estimated that over past ten years, this tax would have raised between $215 million and $650 million a year, averaging about $480 million a year. On the positive side, it would take an important step toward flattening our sales-tax-heavy most-regressive-in-the-nation tax structure, while generating desperately needed new revenue.
So does it have a snowball's chance in hell of passing? 25 co-sponsors signed on to Jinkins' bill, so it's far from a fringe proposal, and 42 other states already tax capital gains, including Oregon at 11 percent, and Idaho at 7.8 percent. The real hurdle will be in the senate, where road-kill Democrats pretty much give ranking Ways and Means Republican Joe Zarelli effective control of budget issues. Backers are reportedly hopeful, but it will take a lot of discipline and arm-twisting to get the votes even to refer this to ballot.