Protecting the capital gains tax is good for our economy and tax equity

[Yo_Mama_Been_Loggin]

This November, Washingtonians will directly vote on state policy. Alas, the three initiatives on the ballot all address tax policy, and few among us relish the thought of mulling over the details of various tax proposals.

Typically tax policy is voted on by our representatives in Olympia, after what can feel like endless study sessions, hearings, floor debates and amendments. This is what happened when finally in 2021, the Washington Legislature passed a capital gains tax to support early learning, child care and schools. Initiative 2109 now asks voters to reject this commonsense policy.

In 2023, the state began collecting a 7% tax on the sales of long-term capital assets. Due to extensive exemptions (on real estate transactions, retirement assets and more) and very sizeable deductions, only a tiny fraction of Washingtonians pay this tax. Yet in the tax’s first year, this small number of people collectively provided $786 million in revenue to the state budget — a testament, indeed, to the enormous amount of income very wealthy residents acquire each year from selling stocks and bonds.

Eliminating the capital gains tax, then, will leave very rich Washingtonians with yet less tax responsibility, making Washington’s upside-down tax structure, in which those with the least pay the most, even more so.

https://www.bizjournals.com/seattle/news/2024/07/22/capital-gains-tax-washington-equity-katie-baird.html

[elias7]

1. Does anyone have insight as to why long term cap gains are not adjusted for inflation?

A $100,000 asset purchased in 2007 needs to have gained 47% to keep pace for inflation, meaning that if an asset gained 47% to $147,000, you have gained nothing, yet you pay a 7% (or in most places around 15%) cap gains tax. IOW, you come out behind unless you correct for inflation. I’m all for fairness on taxing investment gains, but where is the fairness in paying tax on a real loss?