Looking for a quick explanation of national capital gains tax policy? The video below features Economist Jared Bernstein, former Chief Economist and Economic Adviser to Vice President Joe Biden, and Chye-Ching Huang of the Center on Budget and Policy Priorities. Bernstein and Huang explain how capital gains -- profits from the sale of corporate stocks, bonds, and real estate -- receive preferential tax treatment at the national level. They also debunk the myth that special tax treatment for capital gains has led to increased business investment and economic growth. (Spoiler alert: it hasn't.)

A new bipartisan bill was introduced this morning that would apply renewal dates to more than 300 special tax breaks that are on books in our state.  As our analysis from previous years has shown, this commonsense reform is long overdue. House Bill 2762 would require policymakers to proactively review the hundreds of narrow credits, exemptions, deductions, and other special state tax breaks over the next decade. In doing so, the measure would significantly improve transparency and accountability over our entire state budget process.

The capital gains tax proposed in House Bill 2563  represents a bold path to a more stable and adequate revenue system in our state.  The measure would create a new 5 percent excise tax on capital gains in excess of $10,000 each year in Washington state. As we’ve discussed previously (here and here), capital gains – profits on the sale of corporate stocks, bonds, and real estate assets – are highly concentrated among the richest households in our nation. However, new data from the nonpartisan Tax Policy  Center (TPC) shows that capital gains have become significantly more concentrated among the richest few since the onset of the Great Recession.

Two major credit rating agencies (Fitch and Moody’s)  recently downgraded Washington’s credit outlook to ‘negative’ from ‘stable,’ citing our flawed revenue system and an excessive reliance on cuts to core public health and education structures in recent years. Failure to enact adequate long-term revenue reform could jeopardize the states ‘AA+’ credit rating -- the second highest rating a state can achieve – and cost the state millions of dollars in additional interest payments.   

SB 6088 will be heard this afternoon in Senate Ways and Means. The bill would require that all newly enacted tax breaks expire no more than five years after the effective date. It would also require them to include a statement of why the tax preference is needed, its explicit policy goal, and clear metrics for evaluating whether these goals have been met.  If enacted, past tax breaks that are extended or expanded would also be held to the same standards.  SB 6088 is a step towards increased accountability around tax breaks in our state.