Initiative Measure No. 2109 concerns taxes.
This measure would repeal an excise tax imposed on the sale or exchange of certain long-term capital assets by individuals who have annual capital gains of over $250,000. This measure would decrease funding for K-12 education, higher education, school construction, early learning, and childcare.
Should this measure be enacted into law?
The Secretary of State is not responsible for the content of statements or arguments (WAC 434-381-180).
Written by the Office of the Attorney General
The State of Washington imposes various taxes to raise revenue to fund state government. Those taxes include the retail sales tax, the business and occupation tax, the state property tax, and various other state taxes. In 2021, the Legislature passed a law creating a tax on the sale or exchange of certain long-term capital assets, commonly referred to as a “capital gains tax.”
The capital gains tax applies to only some types of capital assets held for longer than a year, such as stocks, bonds, precious metals, or artwork. The tax does not apply to the sale of certain assets, including:
The capital gains tax allows an annual, standard deduction of $250,000 for each taxpayer, which means that the tax applies only to taxpayers who make capital gains over $250,000 in any tax year. For spouses and domestic partners, the combined standard deduction is limited to $250,000, regardless of whether they file joint or separate returns.
The tax rate is seven percent for covered gains. So, for example, if a person bought $150,000 worth of stock and sold it ten years later for $500,000, they would have a net gain of $350,000. The first $250,000 of that gain would be exempt from tax, and the taxpayer would owe seven percent tax on the remaining $100,000 of gain, for a total capital gains tax due of $7,000.
The capital gains tax also allows several other deductions, including:
The law also sets forth how the tax is administered. It includes provisions for allocating gains to Washington versus other states, credits for certain taxes paid to other states, procedures for filing tax returns, and penalties for attempts to evade payment of the tax. Certain figures, like the standard $250,000 deduction, the qualifying gross revenue for the small-business deduction, and charitable donation amounts, are adjusted annually based on inflation.
The first $500 million collected from the capital gains tax each year is deposited into the education legacy trust account, which supports K-12 education, expands access to higher education, and provides funding for early learning and childcare programs. Any amounts collected above $500 million are applied to the common school construction account, which funds the construction of facilities for common schools.
If approved, this measure would repeal the capital gains tax law, and Washington State would no longer impose taxes on the sale or exchange of long-term capital assets. This would also eliminate the funding collected from the tax that currently goes to K-12 education, higher education, early learning, childcare, and school construction.
Written by the Office of Financial Management
For more information visit www.ofm.wa.gov/ballot
If approved by voters, Initiative 2109 will result in an estimated state revenue loss of $2.2 billion over five state fiscal years. This would reduce funding dedicated for K–12 education, higher education, early learning, and child care. Future reductions to funds dedicated for K–12 school construction are possible but not currently forecasted. The estimated net savings for administrative expenses for two state agencies are $10.1 million over five state fiscal years. No local government fiscal impacts are known.
The effective date of the initiative is December 5, 2024.
The provisions of the initiative apply prospectively, not retroactively.
The Department of Revenue (DOR) ceases all collection activities on the effective date, including those activities that are in progress.
Estimates use the state’s fiscal year (SFY) of July 1 through June 30. State fiscal year 2025 is July 1, 2024, to June 30, 2025.
Calendar year refers to January 1 to December 31.
The initiative will not impact local revenue.
The initiative is estimated to result in revenue loss of $2,163,000,000 over five fiscal years from the Education Legacy Trust Account. The first $500,000,000, indexed to inflation, is deposited into the Education Legacy Trust Account each fiscal year. The Education Legacy Trust Account supports K–12 education, expands access to higher education, and provides funding for early learning and child care programs. Additional revenue is deposited into the Common School Construction Account to fund K–12 school facility construction.
Revenue estimates are based on DOR’s excise tax data and the Economic and Revenue Forecast Council (ERFC) June 2024 capital gains tax revenue forecast. Capital gains tax year refers to the calendar year.
The following additional assumptions are made for calculation purposes:
(See Table 1 on page 15.)
State agency savings are estimated to be a net total of $10,147,700 over five state fiscal years as a result of the initiative. Savings by agency are:
The Office of the Attorney General (AGO) will save $23,000 in each state fiscal year from 2025 through 2029. This amounts to total savings of $115,000 over this five-year period.
The AGO estimates savings due to less litigation and less need for client advice services. The AGO expects DOR to need minimal legal advice as the department deals with specific cases where taxpayers seek refunds. It is assumed that cases contesting capital gains tax assessments that had not already been paid will drop, because the department can no longer collect the assessed taxes.
The department will save a net of $10,032,700 over the five-year period between 2025 and 2029. It is assumed that the existing State General Fund appropriation for administering the capital gains tax will end as of June 30, 2025. For state fiscal year 2025, the amount already provided is sufficient to administer the capital gains tax without additional funding. For state fiscal years 2026 through 2029, savings of $2,703,000 per state fiscal year are assumed for capital gains tax administration duties that will no longer be required. The department will also incur costs of $779,300 during this period as described below. The department’s duties to administer taxes include maintaining records, processing refunds, and assisting taxpayers with amended returns for up to five prior tax years. Therefore, the department will continue to have costs related to administering the capital gains tax and the related business and occupation (B&O) tax credit for capital gains tax filers for tax years 2022 and 2023 through December 31, 2028. Starting on January 1, 2029, DOR will have additional costs to decommission the capital gains tax and related B&O tax credit in computer systems. It is assumed that the State General Fund will be the funding source for this work.
In state fiscal year 2025, DOR will have costs that will be paid with existing funds for the following activities:
• Administering computer system changes and testing for capital gains tax and related B&O tax credits.
In state fiscal years 2026, 2027, 2028, and 2029, the department will have costs for the following activities:
In state fiscal year 2029, the department will also have costs to decommission the capital gains tax and related B&O tax credit in the computer system and to perform related required computer system testing.
| SFY 2025 | SFY 2026 | SFY 2027 | SFY 2028 | SFY 2029 | |
|---|---|---|---|---|---|
| Education Legacy Trust | ($424,000,000) | ($398,000,000) | ($422,000,000) | ($447,000,000) | ($472,000,000) |
| Account | |||||
| Common School | $0 | $0 | $0 | $0 | $0 |
| Construction Account | |||||
| TOTAL | ($424,000,000) | ($398,000,000) | ($422,000,000) | ($447,000,000) | ($472,000,000) |
| SFY 2025 | SFY 2026 | SFY 2027 | SFY 2028 | SFY 2029 | |
|---|---|---|---|---|---|
| Office of the Attorney | ($23,000) | ($23,000) | ($23,000) | ($23,000) | ($23,000) |
| General | |||||
| Department of Revenue | $0 | ($2,364,900) | ($2,433,800) | ($2,604,600) | ($2,629,400) |
| TOTAL | ($23,000) | ($2,387,900) | ($2,456,800) | ($2,627,600) | ($2,652,400) |
Repeals Washington’s new backdoor income tax.
Washingtonians have overwhelmingly rejected an income tax 11 times, yet lawmakers disregarded the voters’ wishes and passed a capital gains income tax. Voting “Yes” on I-2109 upholds the will of the people. The IRS, every other state, and the dictionary classify capital gains as income.
Protects home sales and retirement savings from tax expansion.
While proponents claim that “only the rich will pay,” this capital gains income tax is clearly intended to expand and pave the way for a statewide income tax. The Senate author stated, “Adopting a capital gains tax is one of the best things we could do to help advance the possibility of an income tax in our state.” Protect your home and retirement by voting “Yes.”
Maintains the State’s education funding guarantee.
Washington’s constitution mandates full funding for public education. Our public education system receives over $18,500 per student per year, one of the highest in the country. Voting “Yes” on I-2109 ensures our children’s education remains fully funded without new taxes.
Protects working families, small business, and tech innovation.
If we continue down this path, we risk driving family-wage jobs and job creators out of Washington as they relocate to states with lower tax rates. Voting “Yes” on I-2109 helps ensure Washington remains a center of innovation, opportunity, and family-wage jobs.
Stop Cuts To Education, School Construction, and Childcare.
I-2109 eliminates billions of dedicated education dollars– worsening our school funding crisis, reducing access to affordable childcare and early learning, and cutting investments in crumbling schools. I-2109 also eliminates funds from pre-K, special education, job training, and community colleges. Cuts will force job losses in childcare and education at a time when we need more support for kids and families– not less.
Less Than 1% Of Washingtonians Pay Extraordinary Profits Tax.
Retirement funds, real estate, small family-owned businesses, and farms are all exempt from the capital gains tax. In fact, less than 1% of Washingtonians will pay this tax; it only applies to stock sale profits over $250,000 per year.
Reject Washington’s Upside Down Tax Code.
Washington has the nation’s second most upside down tax code, with middle-class families paying a three times larger share of their income on state and local taxes than the wealthiest households. Super wealthy Washingtonians should pay a fair share for education and early learning.
Teachers And Childcare Providers: “Don’t Let A Hedge Fund Millionaire Buy This Election.”
I-2109 is sponsored by hedge fund millionaire Brian Heywood, who will personally benefit from this initiative. Teachers, childcare providers, early learning experts, K-12 leaders, parents, and small business owners are united in urging you to vote No. Don’t give the super wealthy a tax cut that will harm kids, and shift the tax bill to the rest of us.
Suri Reddy, Small Business Owner; Marcus Charles, Neumos, Croc 2.0, Local 360, co-founder CHBP; Rob McKenna, former Washington State Attorney General; Vijay Boyapati, Software Engineer; Chris Gildon, State Senator, Republican, Puyallup; Todd Allred, Plumbing, Heating and Cooling Contractors Association
Contact: (425) 403-8185; info@letsgowa.com; Letsgowa.com
Stephan Blanford, Ed.D, Executive Director, Children’s Alliance; Holly Lindsey, Mom, Owner, Kids Ranch Daycare, Longview; Jenny Slagle, Vice President, Spokane School Board; April Sims, President, Washington State Labor Council; Jacob Vela, League of Education Voters Foundation; Katie Baird, Ph.D, Professor of Economics, UW Tacoma
Contact: (206) 659-6421; info@no2109.org; No2109.org
AN ACT Relating to repealing the tax on capital gains income authorized in chapter 82.87 RCW; repealing RCW 82.87.010, 82.87.020, 82.87.030, 82.87.040, 82.87.050, 82.87.060, 82.87.070, 82.87.080, 82.87.090, 82.87.100, 82.87.110, 82.87.120, 82.87.130, 82.87.140, 82.87.150, and 82.04.4497; and repealing 2021 c 196 ss 18 and 20 (uncodified).
BE IT ENACTED BY THE PEOPLE OF THE STATE OF WASHINGTON:
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