Capital gains tax is budget hang-up

VIDEO: Capital Gains Tax: Who pays and how much?

OLYMPIA, Wash. — When you make a profit selling stock or other investments, or when you make a killing in Seattle's hot housing market, the money you pocket is called a capital gain.

Democrats want Washington to join the 41 other states that already have a capital gains tax.

Much of the $550 million raised would go to education.

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“This proposal pays for an investment in K-12 and higher education and it's an extraordinary responsible and fair proposal," said Democratic House Revenue Chair Reuven Carlyle.

Carlyle's proposal calls for a 5 percent tax on investment income. With exemptions, only the top 2 percent of Washington families would pay and Carlyle says 80 percent of those families are millionaires.

“Your retirement income is completely exempt, your primary resident is completely exempt, agriculture and timber industries completely exempt,” Carlyle said.

We met web developer Steven Rubenstein, who, with his wife, has done well in the booming high-tech industry.

“It's really found money, it's one of those things that you know you get options and don't count it until you cash it in, but then it's like woohoo,” he said.

Rubenstein told lawmakers Tuesday that he supports the capital gains tax.

“Yes, we're willing to pay,” he said. “Are we thrilled about it? I mean, nobody ever wants to raise their taxes, but we understand that it's necessary and we're willing to do our part.”

But Republicans say the booming economy is creating enough tax revenue.

“We believe that we can live with and spend within the current amount of revenue that's coming in,” said Rep. Dan Kristiansen, the House Republican leader.