Governor Inslee's Latest Proposals for Washington State Tax Reform

 

Governor Inslee has proposed to make the following changes to the state’s tax system:

Increase to the WA State Business and Occupation Tax

The governor proposes increasing the state business and occupation tax on services and other activities from 1.5 percent to 2.5 percent. This would generate about $2.6 billion in the next biennium.

Introduction of Capital Gains Tax

The governor is calling for a new capital gains tax on the sale of stocks, bonds and other assets. Exemptions are provided for retirement accounts, homes, farms, and forestry. Washington is one of just nine U.S. states without a capital gains levy. The governor’s proposal would apply a 9 percent tax to long-term capital gains earnings above $25,000 for individuals and $50,000 for joint filers. The capital gains tax would raise an estimated $975 million in fiscal year 2021.

Income Tax

Governor Inslee has not proposed the adoption of a state income tax as a potential reform to the state’s tax system. Washington is currently one of seven US states that does not impose a state income tax.

Other Proposals

In response to the COVID-19 pandemic, racial injustices, and other systematic inequities, Inslee is proposing the allocation of much of the budget to various programs and capital projects. Some of the proposals include:

  • Allocating $26 million toward a new Office of Independent Investigations, which would conduct investigations of police use of excessive force.

  • Investing $10 million in the state’s already established COVID-19 Immigrant Relief Fund, which provides economic relief to Washington immigrant workers.

  • Establishing Juneteenth as a legal holiday.

  • Banning insurance companies from using credit scoring in auto, homeowner, renter, and boat insurance.

  • Spending $79 million to improve broadband access for communities who cannot afford connection in their area.

  • Investing in environmental justice and putting communities most affected by climate change (often people of color), at the forefront of those conversations.

For full details on the 2021-23 Budget Proposal, visit https://www.doh.wa.gov/AboutUs/BudgetContractsandGrants/Budget/202123BudgetProposal

 
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