The controversial capital gains tax in Washington state may appear on the November ballot later this year.
Initiative 2109, which would repeal the tax, qualified for the ballot after collecting enough signatures and getting certified by the state on Tuesday. It now moves to the state legislature but will likely make its way to the ballot.
The tax went into effect in 2022 and brought in nearly $900 million in its first year, exceeding original projections. The first $500 million collected goes toward education and child care programs, while the remainder is designated for school construction projects.
The law imposes a 7% tax on capital gains of more than $250,000 from the sale of stocks and bonds, excluding revenue from real estate and retirement accounts, among other exceptions.
The tax sparked controversy within the tech industry because it targets stocks, a key part of compensation for many startup founders and their employees.
Opponents to the tax had argued that it was functionally an income tax and therefore a violation of the state constitution’s strict rules on these taxes, while supporters said it operated as a sales tax and was therefore legal.
Earlier this month, the U.S. Supreme Court decided not to hear an appeal of a Washington state Supreme Court ruling from March 2023 that found the statewide tax on capital gains to be lawful.
It’s the first tax of its type in Washington history. Most states have a capital gains tax, in addition to federal capital gains taxes.
Washington has no personal or corporate income tax and generates most of its revenue through sales, property, and business and occupation (B&O) taxes. Critics say this regressive approach to taxation hits low-income individuals and households hardest.
There were more than 3,700 returns filed for the capital gains tax in 2023.
A group called Let’s Go Washington, founded by Taiyo Pacific Partners CEO Brian Heywood, supported Initiative 2109 and is backing several other efforts to repeal laws related to carbon taxes, long-term care coverage, and more.
“They’re already planning to expand the tax and target more small business owners, family farms, entrepreneurs and restaurant owners,” Heywood said in a statement. “It’s time to shut the door on this for good.”
Treasure Mackley, executive director of Invest In WA Now, said in a statement Tuesday that “we will not allow a mega-millionaire to grab this money from Washington’s kids just to enrich his wealthy friends.”
