Olympia Update: Debate over capital gains income tax was ‘blatantly dishonest’

Word-games over ‘income tax’ at heart of political battle and people’s right to vote on new tax

Jason Mercier has been watching Olympia politics for many years. He’s witnessed a great deal of the word games politicians play, trying to argue for or against bills and amendments. But Tuesday night’s House debate on the capital gains income tax was unlike anything Mercier had ever witnessed.

Tuesday night, the house spent four-and-a-half hours debating amendments that were proposed on the income tax on capital gains. It ended about 10:30 p.m.

“It was a brutal debate,” he said. “I was prepared for the games that they play on excise tax versus income tax. But there’s no way to sugarcoat it — it was just blatant dishonesty when it came to the attempt to keep this from the people with the emergency clause.”

“The sponsors, shockingly, were trying to claim that wasn’t their intent that it wasn’t an emergency clause, even though the language is pulled directly from the constitution to prohibit our right of referendum,” he said. “They rejected every attempt to remove that language.” 

Jason Mercier has watched political dialogue for many years on behalf of the Washington Policy Center. “It was just blatant dishonesty when it came to the attempt to keep this from the people with the emergency clause.” Photo John Ley
Jason Mercier has watched political dialogue for many years on behalf of the Washington Policy Center. “It was just blatant dishonesty when it came to the attempt to keep this from the people with the emergency clause.” Photo John Ley

One vote on an amendment got very close, according to Mercier. It was a 48 to 50 vote and just barely failed. It would have proactively put the income tax bill on the ballot as a referendum.

The House bill has the emergency clause which was a sticking point in the Senate. The Senate bill passed by one vote, only after removing the emergency clause, so that the people could vote on the income tax via referendum. 

Mercier noted the House bill removed all funding for tax relief.  Reforming the regressive tax system was supposedly a priority for Democrats. On the surface, it was the reason Democrats were calling for the capital gains income tax.

“It makes me wonder whether it’s going to have the votes when it goes back to the Senate,” said Chris Cargill, WPC’s eastern director. “The Senate vote only passed by one senator. If one more senator changes his vote or her vote, in this next round, this could be all for naught.“

Clark County representatives

Sen. Annette Cleveland (Democrat, 49th District) said Thursday that she’s unsure how she’ll vote on a revised version of the bill that would establish a capital gains income tax in Washington.

Senate Bill 5096 passed the state’s House of Representatives 52-46 Wednesday afternoon following two days of debate. Many believe this brings Democrats and Gov. Jay Inslee one step closer to their goal of getting an income tax in the state, even though they claim it is not an income tax. This is allegedly under the guise of reforming the state’s regressive tax code. 

Cleveland is in an influential position over the tax’s future. The original version of the bill barely passed the Senate last month, 25-24. Cleveland was one of three Democrats to join Republicans and vote in opposition.

The senator said she supports efforts to make the state’s tax code more equitable, but remains unconvinced that a capital gains tax is the best way to achieve that end. She voted to send the bill to a conference committee for additional work Thursday.

“Until there is a final version, I am unable to determine how I will vote on final passage,” Cleveland communicated to the media.

Sen. Annette Cleveland: “Until there is a final version, I am unable to determine how I will vote on final passage.” Photo courtesy Annette Cleveland
Sen. Annette Cleveland: “Until there is a final version, I am unable to determine how I will vote on final passage.” Photo courtesy Annette Cleveland

“I voted ‘no’ on the original bill because I believe any new revenue streams we approve this year must have a return on investment, and must offer direct benefit to my constituents,’’ Cleveland said. “I do not want Clark County to be one of the donor counties that does not realize a benefit from this tax.”

“If the Democrats are serious about having an equitable budget, where is the tax relief for lower- and middle-income families?” asked Sen. Ann Rivers (Republican, 18th District).

“Why would we ask business owners, business investors, business entrepreneurs to move to Washington state, or stay in this state, or keep their primary residence in the state of Washington, if we are in effect going to punish them for being successful?” Rep. Vicki Kraft (Republican, 17th District), asked House Speaker Rep. Laurie Jinkins. “Why would we want to punish those that are helping to contribute to our economy, making it strong?

“It’s not their responsibility, madam speaker,’’ Kraft said. “It’s our responsibility as government, state government, to prioritize much more effectively our budget – $58 billion, roughly – and the funds we already have.”

Rep. Peter Abbarno (Republican 20th District) said that the Legislature ought to look for ways to relieve people’s tax burden instead of adding to it.

“Today is a historic day. It’s a historic day in Washington state, because this body after much debate last night and now, are voting to create an income tax,” Abbarno said.

Pierce County Democrats

If you thought party unity was unbreakable and majority Democrats would vote lockstep in favor of a capital gains tax in the last days of this legislative session think again, reports the Tacoma News Tribune editorial board.

“Look no further than Pierce County’s 28th Legislative District to grasp how controversial it is to take a big step toward the slippery slope of an income tax in Washington, one of just nine states without one.

“Consider the purple politics of this swing district — which encompasses University Place, Fircrest, all of South Pierce County and the island communities — to understand why taxing gains on the sale of investment assets has never passed either chamber in Olympia. Until now, when Senate Bill 5096 has passed both the Senate and House.’’

The Tacoma News Tribune reported: “Reps. Mari Leavitt, D-University Place, and Dan Bronoske, D-Lakewood, agree with their colleagues that Washington has a regressive tax structure. But they also know a capital gains tax would do nothing to fix problems with the sales tax and business and occupation tax — huge burdens to small businesses already hammered by COVID-19 shutdowns.

“The capital gains tax proposal just didn’t get there in solving the B&O tax issue or reducing our sales tax for our most vulnerable seniors or veterans,” Leavitt and Bronoske told us in an email Thursday, unavailable for an interview due to House floor action.

“Leavitt and Bronoske were the only Pierce County Democrats to buck the majority, and two of only five House Dems who voted ‘no.’

“Not that their opposition will do much to stop what appears to be a juggernaut.”


Clark County Today asked Cleveland the following in an email:

You have indicated you support the democrat party’s idea of reforming the state’s regressive tax code. Senate Bill 5096 is being sold as reforming the regressive tax code, yet it doesn’t lower the tax burden of poor and low income working families.

What is your position on the capital gains income tax bill and why?

There are two different versions between the House and Senate that must be ironed out. What would it take for you to vote in favor of SB 5096?

As of 3 p.m. Friday afternoon, Sen. Cleveland had not responded to Clark County Today’s request for comment.

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Richard
Richard
3 months ago

Call it what you like, but this is not a standard sales tax Bill. That would include even a coffee pot. We already have a tax on purchasing large ticket items on vehicles and vessels, and this is similar, but in reality, the polar opposite. Capitol gains are only paid when a stock transaction is considered sold. This is not a sales tax to an individual, as it occurs not when the stock is bought, but when it is sold to another, more similar to a B&O tax, but on investment sales. One pays nothing going in, but does going out. It is merely a taxation on a profit, not a purchase. Having gained from an investment, I am more than happy to share my gains, much as one would from a casino win. There is no tax on the purchase of the gambling machine bet, but there is when one turns in the ticket as a sale on those winnings. Clearly the individual and the business is sharing profits for the right to gain from an investment of capitol or discretionary dollars

John Ley
John Ley
3 months ago
Reply to  Richard

Richard — the B&O tax is a tax NOT on ‘profit”, but on every single dollar that a business takes in, regardless of whether or not there is a profit. FYI.

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