Advocates have secured a huge victory toward ensuring everyone in Washington is paying their share in taxes – and raising much-needed revenue to support the economic recovery. The tax on extraordinary profits has passed the House and Senate and will soon be delivered to Governor Jay Inslee to sign into law. This is a critical move toward fixing Washington state’s inequitable and racist tax code. It’s even more meaningful because it comes on the heels of another big win toward making our state tax code more progressive, the passage of the Working Families Tax Credit.
The legislation, ESSB 5096, was sponsored by Senator June Robinson and would enact a 7% excise tax on extraordinary profits from the sale of financial assets of over $250,000 per year. This tax would be paid almost exclusively by the richest 1% of Washingtonians and would generate more than $500 million per year to support investments in child care, early learning, and public schools.
This is the most equitable change to Washington state’s upside-down tax code in nearly 90 years. Our regressive tax code currently relies on the people with the lowest incomes to pay the largest percentage of state and local taxes as a share of income. This has been especially damaging to people who are Black, Indigenous and people of color (BIPOC) – because they face higher average tax rates than wealthy white households as a result of racist policies, like redlining and employment discrimination, that have excluded them from access to wealth and opportunity. It has also prevented our state from having necessary resources to adequately invest in the needs of BIPOC communities. ESSB 5096 would be paid for almost entirely by wealthy white people who have benefited from policies and systems that channel resources to them, and it would increase their taxes by a mere 0.9%.
Meanwhile, taxing capital gains will not only increase investment in communities, but it will also help jumpstart our state economy and create nearly 20,000 jobs per year. The tax revenue will also help our state avoid the mistakes of the last recession by providing a permanent replacement for temporary federal recovery funds. This is a commonsense move to ensure there’s long-term funding when federal funding – which is an important bridge to recovery – runs out.
This victory for our state and its people is the result of the dedication and hard work of many people and organizations that have been advocating for a more just tax code, including the member organizations and leaders involved in All In for Washington, Balance Our Tax Code, and Invest in Washington Now. We applaud the lawmakers who listened to the community voices and took action to pass this policy into law.
The Budget & Policy Center wrote the original policy proposal for this first-in-the-nation capital gains excise tax 10 years ago and has provided timely research and policy analysis about the need for this proposal each year since then. We couldn’t be more excited to see it enacted in the legislature. And we look forward to working with partners in the future to continue advancing policy changes that will help further fix our tax code and provide revenue to robustly invest in community needs.