Judge clears way for initiative to repeal capital gains tax

OLYMPIA, Wash. — Opponents of the state’s new capital gains tax can begin gathering signatures on an initiative seeking to repeal the law after a judge approved final wording for how the measure would be described on the ballot and the initiative petitions.

The Everett Herald reported that Thurston County Superior Court Judge Indu Thom’s Thursday gives the green light to the repeal campaign to start gathering signatures ahead of a July deadline.

At issue is a law signed by Gov. Jay Inslee in May 2021. It took effect Jan. 1, and it’s projected to generate $415 million for early learning and child care programs in 2023, the first year of collections.

Under the law, a capital gains tax will be levied on annual profits reaped from the sale of long-term assets, such as stocks and bonds, for some individuals and married couples. The state will collect 7% of those profits above $250,000. The law contains exemptions for retirement accounts, real estate and some agricultural and small businesses.

An estimated 7,000 taxpayers could be subject to the new tax, according to a 2021 fiscal analysis.

Sponsors of Initiative 1929, which would repeal the law, must collect and turn in signatures of 324,516 registered Washington voters by 5 p.m. July 8 in order to qualify for the November ballot. They will need to turn in closer to 400,000 signatures to account for invalid or duplicate signatures.

Meanwhile, a lawsuit challenging the legality of the capital gains tax is making its way through the courts.

In March, Douglas County Superior Court Judge Brian Huber ruled it is an unconstitutional tax on income. Attorney General Bob Ferguson said at the time that his office would appeal to the state Supreme Court.