Pierce Pioneer

Washington State passes its first Capital Gains tax

The home of America’s two wealthiest men now has its first capital gains tax. 

Gov. Jay Inslee signed into law Senate Bill 5096 on May 4 that taxes the asset revenues of up to 18,000 residents. The new law is effective January 2022. 

The law imposes a 7% tax on the sale of stocks, bonds and other high-end assets over $250,000 for both individuals and couples, and is expected to bring in $500 million in 2023 and upwards of a billion dollars from 2025-27. 

Retirement accounts, real estate, farms and forestry would be exempt from the proposed tax. Also, qualified taxpayers will be allowed to deduct up to $100,000 a year from their capital gains if they made more than $250,000 in charitable donations in the same tax year.

Washington state was deemed the “least equitable” tax system of any state by the Institute on Taxation and Economic Policy in a 2018 report. In light of this fact, Democrat lawmakers have focused on creating a tax system that would produce funds for K-12 schools and child care programs.

According to  one of the bill’s lead sponsors, Washington’s wealth inequality has led to rampant homelessness and less access to education and opportunities. 

“This is a way to invest in people, a way to invest in infrastructure and the needs we have in order to make people successful,” said Sen. Joe Nguyen.

Opponents to the new law challenged that the bill is unconstitutional based on the Washington Supreme Court decision against an income tax in 1933. The court’s decision determined that income, once received, became an asset, therefore the income tax was a property tax rather than an excise tax. 

Under the state constitution, property tax rates must be uniform across any type of property, so a graduated income tax was seen as a nonuniform property tax.

Former Attorney General Rob Mckenna has joined the second lawsuit against this tax on the grounds of its unconstitutionality. 

“Every taxing authority in the country, including the IRS and all other state revenue departments, agrees that capital gains are income,” the lawsuit reads. “Most states tax capital gains as ordinary income subject to the state’s income tax rates. Neither the federal government nor any other state levies an excise tax on capital gains.”

Yet, proponents of the bill suggest that the measure is a tax on the sale or exchange of assets such as stock and bonds. If the owner doesn’t choose to sell their assets then they will not be taxed on this exchange, therefore classifying it as an excise tax rather than a property tax.

Pierce County to Greenlight Behavioral Health Sales Tax Increase

 

During a Pierce County council meeting held on December 22, 2020, members approved a 1/10% sales tax increase meant to fund behavioral health services in the near future. As stated on their official site, by a super-majority vote of 5-1, the small tax increase is estimated to generate $12 million a year and aims to reinvest more Medicaid dollars into Pierce County.

Josephine Peterson from the News Tribune mentions how this tax increase has taken three attempts within the last four years to be passed. In March of 2020, Council Vice Chair Dave Morell was the deciding vote which delayed the passing of said increase. “He told Democrats and the large community turnout that he did not feel comfortable voting for a tax increase until a spending plan was in place,” Peterson stated. “The ordinance was [then] tabled.”

The Accountable Care Organization will oversee this distribution, as it is co-sponsored by Morell and council members Derek Young and Connie Ladenburg. Many within the council feel as though behavioral health is a significant issue facing Pierce County residents. “The ACO pilot plan allows for local engagement, ownership and governance, and Pierce County to build a better healthcare system,” Morell said.

Along with distributing Medicaid dollars, the ACO will use the estimated $12 million generated annually to cover health related sectors not covered by the program or Medicaid. Examples of what this could fund include behavioral health education, empowering those who use behavioral health services and training for first responders and criminal justice professionals interacting with people during behavioral crises.

From the News Tribune, Morell shared their personal experiences involving mental health within their own circle. “I’ve learned a lot about behavioral health through family experiences in dealing with issues of addiction with family members and also dealing with a death in the family that was because of an addictive behavior that went on and on and on,” Morell said. “But I also understand that there has to be guardrails in place to protect the taxpayer.”

Pierce County’s official site states that the status of this sales tax increase has since been sent to state executives. “The county finance director has until April 15, 2021 to certify state and federal agency approval of the ACO model,” the site stated. “Once certified the sales tax increase will be collected. The tax collection will cease after Dec. 31, 2027 unless a future Council extends it.”

More news and updates will be provided as this story unfolds.

 

 

New law to make college education more affordable in Washington state

J C / Courtesy Photo
Within the next year, large businesses will start paying a tax that will let many people in Washington attend college for little or no cost.

Gov. Jay Inslee signs bill that will provide free or reduced college tuition for all ages

Free college education is a subject largely debated, especially during election time. With the upcoming primary and general elections, lawmakers and voters are looking at the issue with fresh eyes. Several eastern states are opposed to the idea while the majority of western states, including Washington, favor it.

Washington state Gov. Jay Inslee signed a major education bill last Tuesday that will efficiently provide free or reduced tuition for all ages of lower- and middle-income students. It will also provide new funding for community colleges or public institutions that are strapped, starting in 2020.

The Workforce Education Investment Act will give families of four making an annual income around $50,000 or less a full-tuition scholarship to college or apprenticeship training. It also provides partial tuition scholarships to families of four earning around $90,000.

This bill will generate more funds for the State Need Grant, which serves Washington state’s lowest-income college students.

This sounds good for Washington students, but whose pockets is this money coming out of?

Taxpayers will not foot the bill this time. Instead, Fortune 500 companies and local businesses will pay a surcharge tax. The largest tech companies like Amazon, Boeing, and Microsoft would pay a higher rate, up to $7 million a year, according to The New York Times.

Many of small local businesses have resisted the tax increase because their profit is not that large.

Although many politicians have not delivered on the promise of free or reduced college tuition, this is the first concrete step for Washington state to provide affordable and equitable education from a dedicated revenue source.

Help others by voting for Proposition One

Commentary
Christian Read

Just in case no one has heard, Proposition One is a bill coming to the voters that would provide greater funding for the Pierce Transit public transportation system. Over the past four years, Pierce Transit faced serious budget cuts, and dealt with them by cutting buses to certain places and certain times of the day.

This year, the cuts are more important than ever before. If Proposition One isn’t passed, the bus system loses both weekend and evening routes, not to mention several other routes – including the one that passes by my house.

Too many people take the public transit system for granted. Many figure that since they don’t use it, they don’t need it. Nobody wants to pay into something that they aren’t going to use.

Unfortunately, this widespread thinking hurts all of the people who depend on the bus system; people ranging from students to senior citizens to the economically unfortunate. These are the people who depend on the bus to get to work, school, and stores.

These people are depending on Pierce County to pass Proposition One. Every vote counts (and that’s not just advice from a fortune cookie.) Just imagine how much life won’t change with a 0.3% increase in sales tax. The change will be practically unnoticeable to taxpayers, but will mean everything to Pierce Transit—and in turn, the riders.

The public transit system is in a sad state. It has become a neglected summer flower: it was once full and fragrant (and I mean that quite literally), but is wilting and shriveling into nothing due to the lack of attention by the public.

Everybody needs to spread the word: our buses need to be watered, with money and fresh air.

I found it rather interesting that over 12 million rides were given to citizens in need last year. If half of the buses get cut, that’s 6 million rides lost, give or take. (I figured that out with my advanced math abilities.) That hurts a lot of people.

I don’t think anyone has heard of what’s at stake with Proposition One. I knew nothing about it until the signs went up at the bus stops by my house: “As of September 30th, this bus stop will be permanently closed.” Only when I went online to research further did I learn about the bill and its significance.

Try asking around. Who actually knows what Proposition One is? Who knows how little it affects taxpayers, compared to how greatly it affects riders? There aren’t many people that realize, it only costs three cents per ten dollars to help hundreds of people get where they need to go. Spread the word! Water our buses!

What the HEC

Students paying off gym one credit at a time

Katelyn Hummel
Staff Writer

As students walk in, they get a feel of the grandeur of the high ceilings and glass windowed architecture that is the 60,000 square foot Health Education Center.

What they don’t get a sense of is the $3.50 per credit they pay each quarter to pay off an almost $8 million loan for the gym that is next to the HEC.

A Certificate of Participation (COP) is a loan from the state government to help construct buildings that the state normally doesn’t provide funds for, such as a gymnasium.

The “loan” is given when students have voted to tax themselves in order to pay off the COP over a period of time.

The college once had a pool (where the HEC stands) but no gym. The pool was considered a money loser in that it required constant maintenance due to chlorine damage. Most other community colleges in the state already had filled and built over their pools.

An earthquare in February of 2001 caused cracks in the pool. It was determined that the costs to repair it and further maintain it outweighed the cost to fill it in and build over it. The state provided money to build the HEC, not funds to add a gym.

“Student leaders brainstormed with college officials about the idea of having a COP and getting [the gym and fitness center together],” said Sylvia Derrick, accounting coordinator at Pierce.

Soon after the brainstorming, students voted in favor of the self-levied COP fee.

The budget for the COP that was allocated to pay for the gymnasium was initiated in 2004. The requirement was for the college to pay off the loan over a 20-year period.

Derrick says that every year the budget’s status is analyzed to make sure that payments are on track with the budget’s projections. The student fees are evaluated so that students are not over paying. In fact, with recent excess enrollment, Derrick says the funds are stable.

“We don’t even know if the $3.50 will pay for it over the lifetime, but the college is required to pay for it regardless if we have student fees because it is a long term debt to the state,” Derrick says.

So far, the student fees have paid off over $3 million with over $5 million to go. The payoff date is June 1, 2026.

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