Showing some spine: On capital gains tax, two Pierce County Democrats break ranks
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.
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.
Both 28th District House members are Democrats, and both voted Wednesday against a new tax that would generate an estimated half billion dollars each year for top caucus priorities —chiefly K-12 education, early learning and child care.
They did it for good reason, putting their ear-to-the-ground awareness of 28th District interests ahead of partisan loyalty.
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.
“Do we think funding for child care and early learning is a good thing? Yes. In fact, investing in early learning is one of the best investments we can make. This bill (5096) just didn’t get to the critical reforms we think we need now and thus, we just couldn’t get to a yes.”
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.
Democrats made history this session by pushing through a 7-percent tax in capital gains above $250,000; it would go into effect in 2022 and be adjusted for inflation annually. To keep the focus on around 7,000 ultra-wealthy Washingtonians, the bill exempts real estate; retirement accounts; timber, fishing, farming and ranching operations; and family-owned small businesses that meet certain qualifications.
The Senate approved the new tax by a whisker last month, 25-24, but only after an emergency clause was stripped that would’ve blocked voters from taking it to the ballot in the form of a referendum. The House passed it with more breathing room this week, 52-46, but the amended version included a “necessity clause” that could set a high bar for a public vote.
Now, as leaders in both chambers try to negotiate a final version this weekend, one linchpin is whether to give voters an escape hatch.
We say yes, Washingtonians ought to have every opportunity to affirm or reject such a revolutionary change in tax policy.
There are any number of reasons why they’d want to. Perhaps they believe the exemptions go too far, or not far enough. Maybe they know that capital gains are treated as income under tax code and that state courts have held a graduated income tax to be unconstitutional.
It’s possible they don’t like changes slapped onto the bill late this session, such as broadening the Education Legacy Trust Account to include higher ed.
Or maybe voters want the same thing we do: To see a holistic package of recommendations from a bipartisan tax structure work group that’s set to hold hearings across Washington after this year’s legislative session. The result of that work, Leavitt and Bronoske said, could be reforms “to make Washington a fairer system for all.”
No matter the outcome, we applaud the two 28th District representatives for their principled votes against a capital gains tax this week. They’re not exactly salty veterans — Leavitt’s in her second term, Bronoske his first — and breaking party ranks requires the kind of backbone their constituents elected them to show.