The certification of an initiative to repeal Washington state’s capital gains tax paves the way for its potential inclusion on the November ballot.
The office of Washington Secretary of State Steve Hobbs confirmed on Tuesday that it has officially notified the legislature about completing and certifying the signature verification for Initiative 2109 (I-2109).
The capital gains tax was implemented three years ago, and it requires individuals to pay 7% on the profits they make from selling certain financial assets such as stocks and bonds. However, this tax does not apply to real estate transactions. It’s worth noting that the first $250,000 of capital gains is exempt from this tax. Additionally, the capital gains tax is only applicable to individuals and to gains that are allocated within the state of Washington.
The initiative received support from the conservative political action committee (PAC) action group called “Let’s Go Washington.”
Brian Heywood, the founder of Let’s Go Washington, believes that the income tax on capital gains not only lacks support from the law and voters, but it also serves as a gateway to a statewide income tax. He asserts that there are already plans to further expand this tax and target additional groups such as small business owners, family farms, entrepreneurs, and restaurant owners. Heywood emphasizes the need to permanently close this door.
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According to a recent news release from the Washington State Department of Revenue (DOR), the initial returns from the capital gains tax have surpassed early expectations, generating over $896 million in its first year.
Since the early filing of capital gains tax returns in 2023, the agency has collected a total of $937,461,292 and received 3,895 returns. You can find more detailed data here.
The Department of Revenue (DOR) has specified that the tax revenue collected annually is dedicated to funding education. The initial $500 million is allocated to the education legacy trust account, while the remaining funds are deposited into the common school construction account.
Last week, multiple media reports highlighted that the legal challenge against Washington’s tax on capital gains reached a standstill after the U.S. Supreme Court declined to hear the case. The Washington State Standard cited the high court’s released orders, which listed the case, Quinn v. Washington, among those it would not consider. (Here is a PDF of the high court’s orders for reference.)
What’s next for I-2109: Legislators will consider it
The fate of I-2109 now lies in the hands of the Washington State Legislature, where it will be carefully considered. The legislature has the power to either pass the bill as it is or suggest their own revised version. In the event that the legislature does not take any action, the initiative will be put on the general election ballot in November for the public to decide.
Lawmakers are faced with two options: either they can pass the initiative as it is, without making any modifications, or they can choose not to take any action on it. If they decide to pass it without changes, the initiative will become law much sooner than if it were to go to the November ballot. However, if lawmakers decline to pass it or take no action, there is a high likelihood that the initiative will be presented to voters in November.
The legislature has the option to create its own alternative measure, which would then appear on the ballot alongside I-2109.
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More on the Let’s Go Washington initiatives
The Secretary of State’s Office has also confirmed on Tuesday that its elections division is currently verifying the signatures on the two remaining pending initiative petitions. The verification process follows a state-mandated procedure that involves examining a 3% random sample of the submitted signatures.
The secretary of state’s office has certified three other initiatives supported by Let’s Go Washington, in addition to I-2109. These initiatives include I-2081 (“Parents have a right to know”), I-2113 (“Reasonable police pursuit”), and I-2117 (“Stop the hidden gas tax”). Let’s Go Washington is also strongly advocating for I-2124 (“Opt out of state-run long-term care coverage act”) and I-2111 (“No state income tax”).
Democratic House Speaker Laurie Jinkins (D-Tacoma) expressed her disappointment with the certification of I-2113, stating that she is concerned about the individuals behind these initiatives. Jinkins specifically mentioned Heywood, a hedge fund manager and prominent Republican donor, remarking that he is an “ultra-wealthy multimillionaire” who is using his financial resources to push initiatives that primarily benefit individuals of his affluent status.
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But her colleagues, including House Minority Leader Rep. Drew Stokesbary (R-Auburn), noted that all the initiatives seem to have garnered over 400,000 voter signatures, even though the official certification for some of them is still pending.
According to Stokesbary, the motivation behind these voters is not driven by financial gain, but rather by their desire to make decisions that they believe will benefit the people of Washington. They are seeking greater options and expressing dissatisfaction with certain policies that have been implemented in Olympia.
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