An excise tax on capital gains moved a step closer to approval on Feb.17, despite Republican lawmakers calling the bill an unnecessary income tax warning it will lead to a judicial challenge.
The Senate's Ways & Means Committee voted 13 to 12 votes in favor of taxing 7% of long-term investment income for individuals, including income from the sale of stocks, bonds, boats, real estate and investments. The tax would not apply to the first $ 250,000 made by both individual and joint applicants.
Republican lawmakers tabled 22 amendments to capital gains tax, none of which were approved. In a statement, Republican Senate chairman John Braun, R-Centralia, said the tax is contrary to the will of voters and ignoring other solutions for the state's economic recovery.
"SB 5096 is a money robbery that disguises itself as a tax reform," said Braun. "The people in our state don't need that, especially at a time like this."
The law would go into effect in January 2022, meaning those who would pay the tax would do so from 2023 onwards. That would likely result in an annual deposit of approximately $ 550 million directly into the state's general fund, according to a press release from Sen. June Robinson, D-Everett.
Capital gains tax would not apply to:
• Residential houses of any value along with the land on which the dwelling is located;
• assets held in a retirement account;
• Assets transferred in the course of conviction proceedings;
• livestock related to agriculture or animal husbandry;
• agricultural land that meets certain requirements;
• certain types of property used in any trade or business, such as machinery and equipment, that are recognized as an expense immediately;
• Capital assets that are only acquired and used for the trading or business purposes of a sole proprietorship
• wood and forest areas;
• Companies that made less than $ 6 million a year;
• and income from stocks and bonds, and corporate and real estate sales of less than $ 250,000.
Taxpayers could receive some credits, one of which is available on business and occupational taxes, as well as a tax credit on some non-government investment income.
Robinson originally submitted the bill as a 9% tax on a single filer who earned over $ 25,000 in capital gains income and joint filers who made more than $ 50,000. In the press release, Robinson said she amended the original bill to address some issues raised by residents of Washington during the first public hearing of the bill on Jan. 14.
Robinson defended the bill in the statement, saying it would only apply to the richest Washingtoners.
"It is a sensible way to ask these wealthy few to work with us to build a stronger and healthier state for all Washingtoners – a state where they can thrive," Robinson said in the press release.
Senator Lynda Wilson, R-Vancouver, told the committee that the tax is viewed as an income tax by both the IRS and other state agencies and would almost certainly be challenged in court if passed.
"My concern here is the cost of the state to taxpayers," said Wilson. "And we clearly don't need taxes because we don't have a deficit."
The bill is on its way to the Senate committee and could go to the Senate to vote.
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