State hauls in nearly $900M from first year of capital gains tax

By Jerry Cornfield / Washington State Standard

Washington’s new capital gains tax brought in $890 million in its first year, state officials said Wednesday.

Those proceeds, garnered from the state’s wealthiest residents, will be funneled into early learning and child care programs, and to school districts in need of dollars for construction and renovation projects.

“The new funds could not come at a more needed time given the budget shortfalls that school districts across the state are seeing,” said Treasure Mackley, executive director of Invest in WA Now, which pushed for the tax. “These projections show that we have the ability to invest in our kids’ futures – when the wealthy do their part. I’m thrilled.”

Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee, anticipates many conversations on how to spend the collections when the legislative session begins in January.

“All the school districts know that there’s a lot of money. Everybody has lots of ideas,” she said.

Lawmakers and Gov. Jay Inslee penciled in $1.1 billion from the tax for the 2023-25 budget – $427 million in the fiscal year that runs through next June and $717 million in the second.

The tax wound up netting an estimated $889.3 million after accounting for refunds and credits, Department of Revenue officials reported Wednesday. Overall, 3,765 returns were filed in the first year.

Revenue employees are still working through some returns and numbers will be updated before the session “but we don’t expect much fluctuation,” agency spokesman Mikhail Carpenter said in an email.

Under the law, the first $500 million is deposited in the Education Legacy Trust Account, a source of dollars for public schools, early childhood education and child care programs.

Anything above that amount – in this case $389 million – is deposited in the common school construction account, which is part of the capital budget.

Superintendent of Public Instruction Chris Reykdal said Wednesday he’d like the money steered to districts for planning, building and renovating school facilities. Dollars could be distributed either in direct grants or through the School Construction Assistance Program.

Washington enacted the capital gains tax in 2021 and it took effect Jan. 1, 2022. The state Supreme Court rebuffed opponents when it found the tax constitutional in a ruling earlier this year.

It levies a 7% tax on the sale or exchange of long-term capital assets, such as stocks, bonds, business interests, or other investments and tangible assets. It only applies to gains in excess of $250,000.

The tax does not apply to the sale or exchange of real estate or to transactions through retirement savings accounts.

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