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Ready for a State Income Tax?

By Guest Columnist Nancy Churchill

There are two bills working their way through the session which would create a capital gains tax in Washington state. In the Senate please watch SB 5096; in the House the number is 1496. They are designed to create “a more progressive tax system.” These bills illustrate how a terrible bill can get passed and people will actually praise it.


These bills will create an income tax on long-term capital assets. They call it a “Capital Gains Excise Tax,” but it's the first step in creating an income tax that will affect everyone. The Democrats have freely spoken about what their goal is.

Another point that you will hear is that it only taxes the “ultra-wealthy.” That sounds good. But, in reality, over time, the ranges of who must pay the tax will grow and grow and grow. The U.S. income tax started as a “tax on only the rich.” Now we all pay. Taxation is a black hole connected to your wallet.


There are additional problems with a capital gains tax. It is often imposed on real estate transactions, like the sale of rental property. However, the buyer pays the extra to offset the capital gains tax! When a property is sold, investors take any tax obligations (federal capital gains, etc.) into consideration when setting the selling price. Capital gains taxes hurt first-time or low-income home buyers, not investors.


In addition, many parts of agricultural income are reported as capital gains. Timber, cattle and some other operations are reported not as earned income, but as capital gains. These small family farms are not “the rich” but they will pay more than their fair share!


Finally, this is written to make a new tax very tempting for people to support. It goes to free college! The House version goes to free childcare! What a great way to get more college students signed up to vote Democrat! Just remember there’s no such thing as a free lunch.


The most underhanded thing about this bill is that it has an emergency clause on it.


The Washington State Constitution provides the people recourse against a bad law—they may gather signatures for a referendum that would repeal it—but not if it bears an emergency clause. Of course, it's obvious this is not an emergency, but we will have no recourse. The emergency clause takes away our right of referendum. This is the Democrats' way of thumbing their noses at the people of this state.


SB 5096 and HB 1496 propose a Capital Gains “Excise” Tax. However, The IRS considers a capital gains tax an income tax, and our state constitution expressly forbids an income tax—everyone must be taxed equally. Does that mean it would be overturned in a court challenge?


Possibly. However, a court challenge would take years to resolve. The old ruling is that income is "property." Many Democrats believe the current, more liberal court will accept the capital gains "excise" tax and will not hold it unconstitutional at all, because capital gains aren't "property." That is their hope.


So what can thoughtful voters do? Democrats control both the Washington House and Senate! However, it is possible to put pressure on a few representatives in “purple” districts, so they realize they might lose votes in the next election. That’s where “We The People” have a role to play.


Here are your action items on these two bills:


First go to apps.leg.wa.gov/billinfo. There are two bills—SB 5096 and HB 1496—look them up and click “Comment on this bill.” Be sure to OPPOSE each bill. Keep your comments short and polite. Be sure to send your comments to all three of your representatives. Numbers matter! Send your comments no matter which way you think your representatives will vote. They need to hear from a lot of people!


Next, talk to your friends and family who live in the Puget Sound region. Please reach out to them with the information about these terrible income tax bills! Your family members can also use the “Comment on this bill” button to reach out to their representatives. We only need four Democrats in the Senate to vote no.


Anyone who lives in the Puget Sound area and has a Democrat representing him or her needs to get organized and put pressure on that legislator to vote no. These legislators need to hear we do not want a capital gains tax or an income tax. They are bad policy!


I’d like to thank my friend from Lewis County, Ruth Peterson. Her research and writing on this topic was the foundation of this article.


Nancy Churchill is the state committeewoman for the Ferry County Republican Party. She may be reached at DangerousRhetoric@pm.me. The opinions expressed in Dangerous Rhetoric are her own.

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