Washington state’s new capital gains tax collected nearly $900 million in its first year, according to the state’s Department of Revenue.
With 3,765 returns filed, DOR reported capital gains collection of $889 million — well above original revenue projections.
The tax targets Washington’s wealthiest residents, with the first $500 million directed toward education and child care programs. Any remainder is used for school construction projects.
“This is a big deal for families, child care providers, and schools across Washington — we worked together to pass the capital gains tax, and it’s exciting to see the impact that this huge step forward will have for our communities,” Treasure Mackley, executive director of Invest in WA Now, said in an email newsletter this week.
The capital gains tax sparked controversy within the tech industry because it targets stocks, a key part of compensation for many startup founders and their employees. Some business leaders said the new law would drive business out of Washington state, particularly with the adoption of remote work during the pandemic.
Advocates argued that the tax is one way that Washington’s regressive tax laws can be altered to help low-wage earners and level the playing field for people of color and rural communities who are overrepresented in low income brackets.
Washington state has no personal or corporate income tax and generates most of its revenue through sales, property, and business and occupation (B&O) taxes.
The new law imposes a 7% tax on capital gains of more than $250,000 from the sale of stocks and bonds, excluding revenue from real estate and retirement accounts, among other exceptions.
The Washington Supreme Court upheld the constitutionality of the tax in March, ruling 7-2 in favor of the argument that the tax is constitutional because it is an excise tax, which is a tax on a good or service, and not a property tax.
