Our state recently deployed a powerful tool for racial justice and the common good: A change in the state’s tax code that makes it much fairer and more equitable. The capital gains tax, approved by the 2021 Legislature, will spur vast improvements in outcomes for Washington’s young children and K-12 students.
The 7% capital gains tax affects only the wealthiest among us — millionaires and billionaires who reap profits of $250,000 or more when they sell stocks or bonds, for example. Just 0.2% of Washington’s taxpayers would pay this tax, but their wealth is so enormous that it would raise $500 million each year for our kids. The revenue from this excise tax would support child care, early learning programs and public schools. These investments are essential for parents and children. But truly every single Washingtonian will benefit from them.
The capital gains tax would make it possible for everyday people to afford child care so they can go back to work, and it expands access to quality education at technical and community colleges so our youth can have the same opportunities to learn and thrive as the wealthiest families do.
With this single step to make our tax code more equitable, we found a powerful way to support families. We give hope to those struggling with the economic and health fallout of the pandemic, we give kids one more shot at reaching their potential. We tell teachers and schools that help is on the way, and we promise small business owners that their employees will have access to affordable child care. We are poised to add thousands of jobs to the state economy.
Parents, child care providers and children’s advocates worked for more than a decade to pass this bill and even though it became a law, our work is not over. A handful of the richest people in our state sued to roll back our progress and overturn the capital gains tax. The case has made it to the state Supreme Court, which heard oral arguments on Jan. 26 and will render a decision on its constitutionality later this year.
At stake is $500 million in early learning and K-12 education funding. But more than that, the state Supreme Court has an opportunity to fully examine our outdated and upside-down tax code. By the court’s own pledge in an open letter to the state in 2020, the justices stated they wanted to “reaffirm our deepest level of commitment to achieving justice by ending racism.”
We believe the capital gains tax case is the moment to make good on the promise to bring justice to the entire system. Besides being unfair — a system where low- and middle-income earners pay as much as 17% of their income in state and local taxes while those at the top pay just 3% — our tax code has harmed Black and brown communities. Study after study has shown how racist policies impact the financial well-being of Washingtonians who are Black, Indigenous and people of color.
With passage of the capital gains tax, our state went from being one of the most regressive tax systems in the country to one that promises to be more balanced and fairer. We have a long way to go, but when we insist that everyone — including the wealthiest Washingtonians — pay what they truly owe in taxes — we begin to undo decades of racism and disinvestment that have hurt families, communities and small businesses.
Tax policies should proactively create equitable access to a high quality of life and resources for all communities — and especially those that have been historically marginalized. Policies should help to sustain the things we all rely on, like vibrant schools where our kids learn, roads we drive on and transit that we take to work. We can no longer ask those with the least to pay the biggest share for the services and supports needed to see ourselves through, in good times and bad.
With its review of the capital gains tax law, the Supreme Court can render justice and bring our taxes closer to a fair and equitable system.
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