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OLYMPIA–The state Senate’s approval of a bill today is the first step toward the possibility of a state income tax on all Washingtonians, argues 9th District Sen. Mark Schoesler.
Schoesler voted against Senate Bill 5096, the proposal would impose a 7% state income tax on capital gains. The proposal passed 25-24. It now goes to the House of Representatives for further consideration.
“This isn’t the first time we’ve heard a myth that this kind of tax proposal will take care of certain needs,” said Schoesler. “We were told not that many years ago that the ‘death tax’ would fund education, but it did not turn out that way. We’ve heard for years how regressive our tax code has been and how it needs to be fixed. But when this bill was in the Ways and Means Committee earlier this session, we offered an amendment that would lower the state sales tax, which affects everyone. It was rejected.”
Schoesler said his vote today allows him to keep a promise he made nearly three decades ago.
“When I first ran for the Legislature in 1992, I said I would never vote for a state income tax. Now, 29 years later, I still won’t.”
Schoesler said one of Washington’s advantages when it comes to attracting talent and companies to the state has been the lack of a state income tax.
“But if this bill becomes law, we will lose that competitive advantage and I’m very concerned that many wealthy Washingtonians will leave the state, taking their money with them. That will hurt our state.”
Schoesler pointed out that Washington voters have rejected a state income-tax proposal 10 times over the past 85 years. The most recent rejection happened in 2010 when 64 percent of voters shot down Initiative 1098. A strong majority of 9th District voters opposed I-1098.
“Voters here have a long history of not wanting a state income tax,” said Schoesler. “A recent statewide Elway Poll shows that is still the case; it revealed only 41 percent of respondents support a tax on capital gains.”
Schoesler, who serves on the budget-writing Senate Ways and Means Committee, pointed out that the state’s long-term revenue outlook is solid and improving, disproving Democrats’ argument that a state income tax on capital gains is needed to help add revenue to Washington’s coffers.
“Despite last year’s temporary drop in revenue caused by the COVID-19 shutdown, we are again in good shape in terms of revenue. Washington doesn’t want or need a state income tax. It’s disappointing that the Democrats chose to ignore the numbers and voters’ sentiments and pass this unnecessary and harmful bill anyway.”
Before the bill was passed, the Senate approved an amendment removing language declaring the tax’s enactment to be an emergency. Had the so-called “emergency clause” stayed in the bill, it would have prevented citizens from filing a referendum to place SB 5096 on the state’s next general-election ballot, for voters to confirm or repeal.
“I’m very glad the emergency clause was removed because otherwise it would have preempted the voters’ right to challenge this bill later, should it become law,” said Schoesler.
If SB 5096 is approved by the Legislature and eventually becomes law, it likely will end up on the statewide ballot as a referendum or in court before it can take effect.
“Throughout Washington’s history, the state Supreme Court has rejected similar state income-tax measures several times. The Internal Revenue Service is clear that income from capital gains is taxable income. If this issue reaches the high court again, I’m hopeful it will again be struck down,” said Schoesler.